Aqina International Holdings Limited (the Company ) (incorporated in the Cayman Islands with limited liability)

Transcription

1 The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof. Application Proof of Aqina International Holdings Limited (the Company ) (incorporated in the Cayman Islands with limited liability) WARNING The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the Exchange )/the Securities and Futures Commission (the Commission ) solely for the purpose of providing information to the public in Hong Kong. This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsors, advisers or member of the underwriting syndicate that: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document; the publication of this document or supplemental, revised or replacement pages on the Exchange s website does not give rise to any obligation of the Company, its sponsors, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering; the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document; the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities; this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; neither the Company nor any of its affiliates, advisers or underwriters is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document; no application for the securities mentioned in this document should be made by any person nor would such application be accepted; the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States; as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing. If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period.

2 IMPORTANT If you are in any doubt about any contents of this document, you should obtain independent professional advice. Aqina International Holdings Limited (incorporated in the Cayman Islands with limited liability) [REDACTED] Number of [REDACTED] : [REDACTED] Shares Number of [REDACTED] : [REDACTED] Shares (subject to reallocation) Number of [REDACTED] : [REDACTED] Shares (subject to reallocation) [REDACTED] : Not more than HK$[REDACTED] per [REDACTED] and expected to be no less than HK$[REDACTED] per [REDACTED], plus brokerage fee of 1%, SFC transaction levy of % and Stock Exchange trading fee of 0.005% (payable in full upon application in Hong Kong dollars and subject to refund) Nominal Value : HK$0.01 per Share Stock Code : [REDACTED] Sole Sponsor [REDACTED] and [REDACTED] Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. A copy of this document, having attached thereto the documents specified in the section headed Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection in Appendix V to this document, has been registered with the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this document or any other documents referred to above. The [REDACTED] is expected to be determined by the [REDACTED] between the [REDACTED] (for itself and on behalf of the Underwriters) and our Company on or about [REDACTED] or such later date as may be agreed between the parties. If, for any reason, the [REDACTED] (for itself and on behalf of the Underwriters) and our Company are unable to reach an agreement on the [REDACTED] by that date or such later date as agreed by our Company and the [REDACTED] (for itself and on behalf of the Underwriters), the [REDACTED] will not become unconditional and will lapse. The [REDACTED] will not be more than HK$[REDACTED] per [REDACTED] and is expected to be not less than HK$[REDACTED] per [REDACTED], unless otherwise announced. The [REDACTED] (for itself and on behalf of the Underwriters) may, with the consent of our Company, reduce the above indicative [REDACTED] range at any time prior to the [REDACTED]. In such a case, notice of the reduction in the indicative [REDACTED] range will be available on the website of the Stock Exchange at and the website of our Company at Prospective investors of the [REDACTED] should note that the [REDACTED] (for itself and on behalf of the Underwriters) may in its absolute discretion, upongiving notice in writing to our Company, terminate the Underwriting Agreements with immediate effect if any of the events set forth under the section headed Underwriting Underwriting arrangements and expenses Grounds for termination of this document occurs at any time prior to 8:00 a.m. (Hong Kong time) on the [REDACTED]. Should the [REDACTED] (for itself and on behalf of the Underwriters) terminate the Underwriting Agreements in accordance with the terms of the Underwriting Agreements, the [REDACTED] will not proceed and will lapse. Prior to making an investment decision, prospective investors should carefully consider all the information set out in this document, including the risk factors set out in the section headed Risk Factors of this document. The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be affected, sold, pledged of transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws of the United States. There will be no [REDACTED] of securities in the United States. [REDACTED]

3 CHARACTERISTICS OF GEM GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM. The principal means of information dissemination on GEM is publication on the website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the Stock Exchange s website at in order to obtain up-to-date information on companies listed on GEM. i

4 EXPECTED TIMETABLE [REDACTED] ii

5 EXPECTED TIMETABLE [REDACTED] iii

6 EXPECTED TIMETABLE [REDACTED] iv

7 CONTENTS IMPORTANT NOTICE TO INVESTORS This document is issued by our Company solely in connection with the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] offered by this document pursuant to the [REDACTED]. This document may not be used for the purpose of and does not constitute an offer to sell or a solicitation of an offer in any other jurisdiction or in any other circumstances. You should rely only on the information contained in this document to make your investment decision. We, the Sole Sponsor, the [REDACTED], and the [REDACTED] have not authorised anyone to provide you with information that is different from what is contained in this document. Any information or representation not contained in this document must not be relied on by you as having been authorised by us, the Sole Sponsor, the [REDACTED] and the [REDACTED], any of their respective directors, officers, employees, agents or representatives, or any other person or party involved in the [REDACTED]. The contents on the website at which is the official website of our Company, do not form part of this document. Characteristics of GEM... i Page Expected Timetable... Contents... ii v Summary... 1 Definitions Glossary of Technical Terms Forward-looking Statements Risk Factors Waiver from Strict Compliance with the GEM Listing Rules Information about this Document and the [REDACTED] Directors and Parties Involved in the [REDACTED] Corporate Information Industry Overview Regulatory Overview History, Reorganisation and Corporate Structure Business Relationship with our Controlling Shareholders v

8 CONTENTS Page Connected Transactions Directors, Senior Management and Employees Share Capital Substantial Shareholders Financial Information Future Plans and Use of Proceeds Underwriting Structure and Conditions of the [REDACTED] How to Apply for [REDACTED] Appendix I Accountants Report... I-1 Appendix II Unaudited Pro Forma Financial Information... II-1 Appendix III Summary of the Constitution of our Company and Cayman Islands Company Law... III-1 Appendix IV Statutory and General Information... IV-1 Appendix V Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection... V-1 vi

9 SUMMARY This summary aims to give you an overview of the information contained in this document. Since it is a summary, it does not contain all the information that may be important to you. You should read the document in its entirety before you decide to invest in our Shares. There are risks associated with any investment. Some of the particular risks in investing in the [REDACTED] are set out in the section headed Risk factors of this document. You should read that section carefully before you decide to invest in our Shares. OVERVIEW Our history can be traced back to the establishment of Boong Poultry, one of our operating subsidiaries in Singapore, in 1994 by Dato Tan, our executive Director and Chairman of the Board. Since then, we have accumulated more than 20 years of experience in the chicken production industry in both Singapore and Malaysia. We have become a semi-integrated operator in the chicken production industry by (i) sourcing and sales of broilers and provision of chicken slaughtering services; (ii) breeding and sales Kampung chickens; and (iii) trading of non-chicken meat products. To complement our operation, we have our own vehicle fleet and provide ancillary logistics services to our customers. OUR BUSINESS MODEL We sell two breeds of chickens, namely (i) broilers; and (ii) Kampung chickens. Broilers are globally the most common type of chicken meat consumed, particularly for commercial chicken production. Kampung chickens, on the other hand, are typically a slower growing breed compared to broilers. We source live broilers of harvest-stage mainly from our live broiler suppliers and Contract Farmers. The Contract Farmers rear broilers and sell their broilers to us exclusively. Live broilers procured from Contract Farmers or live broiler suppliers, save for those sold in Malaysia and Singapore as live chickens, are delivered to our halal-certified Slaughtering Plant in Malaysia for slaughtering and processing. Kampung chickens, on the other hand, are reared in breeding farms managed and run by our Group. Most of our Kampung chickens are exported alive and delivered to the Licenced Slaughterhouse in Singapore for slaughtering and further processing. We also engage in trading of non-chicken meat products such as pork, beef, duck and mutton and providing slaughtering services to other chicken production companies in Malaysia on a standalone basis in our Slaughtering Plant in Malaysia. Our live chickens and products. We sell live Kampung chickens and live broilers. Apart from that, we also sell products which mainly include (i) chicken meat products such as chilled and frozen broilers and Kampung chickens; and (ii) non-chicken meat products such as pork, beef, duck and mutton procured from our suppliers. Our pricing policy. We generally determine the price of our live chickens, chicken meat products and non-chicken meat products on a cost-plus basis with reference to the following factors: (i) the amount purchased by the customers; (ii) the cost of production and transportation; (iii) the prevailing market circumstances; and (iv) the payment terms. Our revenue: During the Track Record Period, our total revenue amounted to approximately RM131.6 million, RM168.3 million and RM94.3 million, respectively. Our total revenue increased by approximately RM36.7 million or 27.9% from approximately RM131.6 million for FY2016 to approximately RM168.3 million for FY2017 mainly due to the increase in the revenue generated from the sourcing and sales of broilers and provision of chicken slaughtering services from approximately RM98.8 million for FY2016 to approximately RM124.7 million for FY2017. The following table sets forth a breakdown of our revenue by product categories during the Track Record Period: Year ended 31 March Six months ended 30 September RM 000 % RM 000 % RM 000 % RM 000 % (Unaudited) Sourcing and sales of broilers and provision of slaughtering services : Chilled and frozen broilers: Dressed/whole broilers 59, % 71, % 35, % 38, % Broiler spare parts (Note 1) 23, % 32, % 14, % 22, % Live broilers 14, % 19, % 9, % 7, % 1

10 SUMMARY Year ended 31 March Six months ended 30 September RM 000 % RM 000 % RM 000 % RM 000 % (Unaudited) Provision of slaughtering services (Note 2) 1, % 1, % % 1, % Subtotal , % , % , % , % Breeding and sales of Kampung chickens : Chilled and frozen Kampung chickens: Dressed/whole Kampung chickens 19, % 20, % 9, % 11, % Kampung chicken spare parts (Note 3) 2, % 2, % % 1, % Live Kampung chickens 5, % 8, % 3, % 3, % Subtotal , % , % , % , % Trading of non-chicken meat products 5, % 12, % 3, % 8, % Total 131, % 168, % 78, % 94, % Notes: 1. This item includes (i) broilers cut in pieces; and (ii) broiler parts, such as drumsticks, wings, breasts, etc. 2. This item refers to provision of slaughtering services to other chicken production companies on a standalone basis in Malaysia. 3. This item includes (i) Kampung chickens cut in pieces; and (ii) Kampung chicken parts, such as drumsticks, wings, breasts, etc. Our gross profit and gross profit margins. During the Track Record Period, our gross profit (before biological asset fair value adjustments) was approximately RM24.3 million, RM30.2 million and RM15.3 million, respectively. The table below sets forth the breakdown of our gross profit and gross profit margin by business category during the Track Record Period: For the year ended 31 March For the six months ended 30 September Gross profit Gross profit margin Gross profit Gross profit Gross profit Gross profit margin Gross profit Gross profit RM 000 % RM 000 % RM 000 % RM 000 % (Unaudited) Sourcing and sales of broilers and provision of slaughtering services (Note 1) 16, % 19, % 9, % 10, % Breeding and sales of Kampung chickens (Note 2) 7, % 9, % 3, % 4, % Trading of non-chicken meat products % 1, % % 1, % Before biological asset fair value adjustments 24, % 30, % 13, % 15, % After biological asset fair value adjustments 18, % 24, % 10, % 11, % 2

11 SUMMARY Notes 1. The broilers include live broilers and broiler meat products; and the slaughtering services provided by our Group include the slaughtering of both broilers and Kampung chickens. 2. The Kampung chickens include live Kampung chickens and Kampung chicken meat products. For detailed analysis of our Group s revenue, gross profit and gross profit margin, please refer to the section headed Financial Information Principal components of combined statements of profit and loss and other comprehensive income of this document. Breeding farms for Kampung chickens and our Slaughtering Plant in Malaysia. As at 31 March 2016, 31 March 2017, 30 September 2017 and the Latest Practicable Date, we managed and operated 12, 11, 11, and 10 breeding farms of Kampung chickens. During the Track Record Period, most of our live chickens for domestic consumption in Malaysia are slaughtered and processed in our Slaughtering Plant in Malaysia, with a gross land area of approximately 3,847 m 2 and total gross factory built-up area of approximately 3,400 m 2. The production capacity and utilisation rate of our production facilities are set out in the following table: Our production facilities (owned/ leased) (Note 1) Slaughtering Plant in Malaysia (Note 2) Breeding farms for Kampung chickens (Note 5) Production capacity of the facilities (approximately 000 units/year) For the six months ended 30 September For the year ended 31 March Production Production Actual capacity of Actual capacity of production Utilisation the production Utilisation the volume rate facilities volume rate facilities (approximately 000 units/year) (approximately 000 units/year) (approximately 000 units/year) (approximately 000 units/period) Actual production volume (approximately 000 units/period) Utilisation rate 9,264 4, % 13,728 7, % 6,912 5, % (Note 3) (Note 4) (Note 4) 2,697 1, % 2,760 1, % 1, % Note : 1. The capacity and actual output volume of our processing facilities in (i) our Slaughtering Plant in Malaysia; (ii) the Licenced Slaughterhouse; and (iii) our workshop in Singapore may be varied depending on a number of factors, including the types of products to be produced, their respective specifications, the working hours of the relevant machineries, etc. In addition, subject to the types and specifications of products being processed, the machineries and equipment for processing are subject to constant manual adjustments by our employees, the output volume of which may be varied depending on the proficiency of these employees. As such, the production capacity and utilisation rate of our processing operations cannot be ascertained objectively. 2. The production capacity of our Slaughtering Plant in Malaysia is calculated based on (i) the actual number of working days for FY2016, FY2017 and the six months ended 30 September 2017 being 193 days, 286 days and 144 days respectively; (ii) the working hours of production staff being eight hours per day; and (iii) the hourly production capacity of production machineries and equipment being 6,000 heads of chickens per hour. The actual production volume is the actual number of chickens slaughtered for the corresponding periods. 3. Our Group commenced slaughtering in our Slaughtering Plant in Malaysia in August The production capacity for FY2016 is therefore calculated based on the approximately 8-month period from August 2015 to March Before August 2015, slaughtering was carried out in another slaughtering plant held by Aqinajaya, which ceased operation after August Our Group commenced slaughtering in our Slaughtering Plant in Malaysia in August During FY2016 and FY2017, our Group was still in the course of establishing its slaughtering and processing operation, which explains the relatively low utilisation rate during the said period. The increase in utilisation rate for the six months ended 30 September 2017 was due to (i) an increase in the number of chickens slaughtered for other chicken production companies; and (ii) an increase in the slaughtering of broilers by our Group. 5. As at 31 March 2016, 31 March 2017 and 30 September 2017, we operated and managed 12, 11 and 11 breeding farms for Kampung chickens. The production capacity is calculated based on (i) 365 days per year or 183 days per six months, (ii) around 3.8 breeding cycles for FY2016 and FY2017 or around 1.9 breeding cycle for the six months ended 30 September 2017, respectively. 3

12 SUMMARY COMPETITIVE LANDSCAPE According to the Ipsos Report, as of 2016, there were approximately 645 players involved in chicken production activities in Malaysia, including raising, breeding, farming, distribution and sales of chicken. Our Group accounted for approximately 0.8% of the total gross output value of chicken production industry in Malaysia as of The chicken production industry has undergone a transformation over the last decade to becoming more consolidated amid the growing dominance of large scale operators with full or partial vertical integration. Regarding the chicken production industry in Singapore, due to land scarcity, the chicken production activities remained low in Singapore as of Upstream production including raising, breeding and farming activities are minimal in Singapore. Most of the production are along the downstream of supply chain, including processing, distribution and sales of chicken. In 2016, our Group accounted to approximately 5.8% of the total volume of chicken slaughtered and processed in Singapore. In Singapore, 34% of the total imported chicken products was live chicken, whereas 66% of them were processed and packaged outside the country prior to import in OUR CUSTOMERS AND SALES CHANNELS We have customers in both Malaysia and Singapore. During the Track Record Period, our customers mainly included (i) wholesalers; (ii) retailers; (iii) food and beverage chains; and (iv) end-consumers. For FY2016, FY2017 and the six months ended 30 September 2017, our top five customers accounted for approximately 20.2%, 17.4% and 14.2% of our total revenue, respectively. Our largest customer accounted for approximately 8.7%, 8.9%, and 5.7% of our total revenue for the same periods. The table below sets forth a breakdown of our revenue generated from different sales channels during the Track Record Period: Year ended 31 March Six months ended 30 September RM 000 %of total revenue RM 000 %of total revenue RM 000 %of total revenue RM 000 %of total revenue (Unaudited) Revenue Wholesalers 45, % 59, % 26, % 31, % Retailers (Note 1) 39, % 47, % 26, % 24, % Food and beverage chains 32, % 39, % 15, % 24, % Direct sales (Note 2) 12, % 20, % 9, % 12, % Others (Note 3) 1, % 2, % 1, % 2, % Total 131, % 168, % 78, % 94, % Notes: 1. Retailers mainly include supermarkets and hawker stalls. 2. Direct sales refer to sales by our Group to end-consumers directly through operating stalls in the outlets of Fresh Hub Group, We Mart Sdn. Bhd. and One Stop Fresh Mart Sdn. Bhd. As at 31 March 2016, 31 March 2017 and 30 September, we operated 17, 26 and 26 direct sales stalls, respectively. 3. Others mainly include (i) walk-in customers who purchased directly from our Slaughtering Plant in Malaysia; and (ii) customers who engage us for slaughtering services on a standalone basis in the Slaughtering Plant in Malaysia. OUR SUPPLIERS, PROCUREMENT AND MAJOR RAW MATERIALS Our suppliers. During the Track Record Period, our suppliers mainly included (i) suppliers of live chickens, chicken meat products, DOCs and chicken feeds; (ii) the service provider who operates the Licenced Slaughterhouse in Singapore; and (iii) our Contract Farmers. For FY2016, FY2017 and the six months ended 30 September 2017, our top five suppliers amounted to approximately RM44.7 million, RM47.2 million and RM31.9 million, respectively, representing approximately 45.3%, 37.1% and 43.4% of our total purchases, respectively. Raw materials of our Kampung chickens breeding activities. The principal raw materials used in the breeding of our Kampung chickens are DOCs, chicken feeds, vaccines and medicines. During the Track Record Period, the total purchases of raw materials for breeding Kampung chickens amounted to approximately RM13.9 million, RM14.9 million and RM7.6 million, respectively, representing approximately 12.3%, 10.3% and 9.2% of our total cost of sales. 4

13 SUMMARY Our procurement. We source live broilers of harvest-stage mainly from our live broiler suppliers. We generally place orders with our suppliers by purchase orders based on estimated demand one to seven days before the scheduled production or delivery to our customers as live broilers. On the other hand, to ensure stable supply of broilers, we enter into agreements with Contract Farmers from whom we sourced broilers during the Track Record Period. Regarding our breeding of Kampung chickens activities, Kampung chicken DOCs sourced from our DOCs suppliers are delivered to breeding farms managed and run by our Group directly upon which they will no longer be treated as DOCs but Kampung chickens at the growing stage. COMPETITIVE STRENGTHS Our Directors believe that the success of our Group is attributable to, among other things, the following competitive strengths: (i) semi-integrated operation which enables us to reduce reliance on third-party suppliers; (ii) comprehensive quality assurance and control system; (iii) stable business relationship with our suppliers and customers; and (iv) experienced and dedicated management team with proven track record. For more details, please refer to the section headed Business Competitive strengths of this document. BUSINESS STRATEGIES Our principal business objectives are to achieve sustainable growth, further strength our position in the chicken production industry in Malaysia and Singapore, and to create long-term value for our Shareholders by executing the following key strategies: (i) establishing a new halal-certified processing plant and cold-room facilities in Malaysia in our existing warehouse; (ii) acquisition of a parcel of land for expanding our halal-certified processing plant and cold-room facilities in Malaysia; (iii) expansion of our business horizontally by mergers and acquisitions, investment or establishing joint venture companies or entering into business collaboration with chicken production companies; and (iv) expansion of our vehicle fleet. For more details regarding our business strategies, please refer to the section headed Business Business strategies of this document. SHAREHOLDER INFORMATION Immediately following completion of the Capitalisation Issue and the [REDACTED] (without taking into account Shares which may be issued upon the exercise of option granted under the Share Option Scheme), Upon Global Investments, which is wholly-owned by Dato Tan, and Stanmer Investments, which is wholly-owned by Datin Teo, will be interested in aggregate approximately [REDACTED]% of the issued share capital of our Company. Accordingly, Upon Global Investments, Dato Tan, Stanmer Investments and Datin Teo will be our Controlling Shareholders. For more details regarding the shareholding interest of our Controlling Shareholders, please refer to the section headed Relationship with our Controlling Shareholders of this document. Our Controlling Shareholders have confirmed that none of them and their respective associates is interested in any business which competes or is likely to compete, directly or indirectly, with the business of our Group. Our Controlling Shareholders, Dato Tan and Datin Teo, are executive Directors of our Company. For further details, please refer to the section headed Directors, Senior management and employees Directors and senior management of this document. [REDACTED] INVESTMENT On 1 September 2017, a subscription agreement was entered into between Aqina Holdings and Ruby Garden Global, pursuant to which Ruby Garden Global agreed to subscribe for, and Aqina Holdings agreed to procure its holding company to allot and issue 13% of its then issued capital to Ruby Garden Global. Subsequently, Gallus Investments issued and allotted 1,300 ordinary shares credited as fully paid to Ruby Garden Global at the total subscription price of HK$15,000,000. It is expected that Ruby Garden Global will bring strategic benefits to our Group by providing financing and strategic advice to our Group s business. The said 1,300 ordinary shares were properly and legally allotted and issued on 29 September After the said allotment, Gallus Investments was owned as to 69.6% by Upon Global Investments, 17.4% by Stanmer Investments and 13.0% by Ruby Garden Global, respectively. For further details, please refer to the section headed History, Reorganisation and corporate structure [REDACTED] Investment of this document. KEY OPERATIONAL AND FINANCIAL DATA The following tables present a summary of key operational and financial data during the Track Record Period and should be read in conjunction with our financial information included in the Accountants Report set forth in Appendix I to this document, including the notes thereto. 5

14 SUMMARY Selected information extracted from the combined statements of profits or loss Six months ended Year ended 31 March 30 September RM 000 RM 000 RM 000 RM 000 (Unaudited) Revenue 131, ,284 78,378 94,343 Cost of sales (113,220) (143,878) (67,845) (82,811) Gross profit 18,372 24,406 10,533 11,532 Net changes in fair value less costs to sell of biological assets 5,932 6,124 3,341 3,320 Other income 883 1, Selling and distribution costs (3,034) (4,531) (1,592) (2,499) Administrative expenses (15,590) (19,153) (8,597) (10,133) Finance costs (1,192) (1,608) (770) (800) [REDACTED] expenses [REDACTED] [REDACTED] [REDACTED] [REDACTED] Profit before taxation 5,371 6,731 3,474 2,062 Income tax expenses (1,330) (1,336) (716) (534) Profit for the year/period 4,041 5,395 2,758 1,528 Our Group s major revenue represents the amounts received and receivable for revenue deriving from sourcing and sales of broilers and provision of chicken slaughtering services and the breeding and sales of Kampung chickens. Since our live chickens and products were provided to customers on an as-needed basis, our revenue fluctuated during the Track Record Period, subject to various factors such as consumer demand and consumption behaviour for Kampung chickens and broilers in Singapore and Malaysia. For more details, please refer to the paragraphs headed Financial information Product portfolio and customer demand for our live chickens and products in Singapore and Malaysia of this document. Biological assets Kampung chickens reared in the breeding farms managed and run by our Group (i.e. from the beginning to the end of their breeding period) are considered as our biological assets and were stated at fair value less costs to sell as at the valuation dates. We determine the fair values less costs of disposal of biological assets at the end of each reporting period with reference to the market-determined prices, rearing costs, mortality rate and risk in price uncertainty upon harvest, growing conditions, other costs incurred and professional valuation. Biological assets were stated at fair value less costs to sell as at the reporting dates. Our biological assets were independently valued by Jones Lang LaSalle, an independent valuer with extensive experience in valuation of biological assets. For more details, please refer to the section headed Financial Information Valuation of biological assets of this document. The following table sets out the changes in value of our biological assets as at the end of each of the reporting periods during the Track Record Period: As at 30 As at 31 March September RM 000 RM 000 RM 000 At 1 April 1,939 2,046 2,408 Increase due to purchase/raising 16,144 18,878 9,489 Net changes in fair value less costs to sell (unrealised) Net changes in fair value less costs to sell (realised) 5,844 5,661 3,316 Transfer to inventories at the point of harvest (21,303) (23,926) (12,525) Decrease due to culling (666) (714) (300) At 31 March/30 September 2,046 2,408 2,392 6

15 SUMMARY Selected information extracted from the combined statements of financial position At 30 At 31 March September RM 000 RM 000 RM 000 Current assets 31,718 41,747 52,580 Current liabilities 25,919 31,756 33,019 Net current assets 5,799 9,991 19,561 Selected information extracted from the combined statements of cash flows Year ended Six months ended 31 March 30 September RM 000 RM 000 RM 000 RM 000 (Unaudited) Operating cash inflows before movements in working capital 9,304 11,869 5,602 4,974 Net cash from operating activities 11,231 11,032 3,018 2,784 Net cash used in investing activities (11,226) (2,745) (1,205) (1,227) Net cash from (used in) financing activities 2,314 (5,124) (2,340) 5,402 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the end of the 2,319 3,163 (527) 6,959 year/period, represented by bank balances and cash 4,676 8,175 4,332 14,902 Cost of sales Our cost of sales mainly consists of (i) live broilers purchased from suppliers and Contract Farmers; and (ii) DOCs of Kampung chickens, chicken feeds, and purchase of live Kampung chickens from suppliers. The following table sets out a breakdown of our cost of sales by production cost and the percentage of such cost to our total cost of sales during the Track Record Period: Year ended 31 March Six months ended 30 September RM 000 %of total cost of sales RM 000 %of total cost of sales RM 000 %of total cost of sales RM 000 %of total cost of sales (Unaudited) Cost of sales Opening inventories 2, % 3, % 3, % 3, % Broilers Purchases from broiler suppliers 54, % 71, % 32, % 43, % Purchases from Contract Farmers 19, % 24, % 12, % 9, % Total purchases of procuring broilers 74, % 95, % 45, % 53, % Kampung chickens Chicken feeds 9, % 9, % 5, % 5, % DOCs 3, % 4, % 1, % 1, % Medicine and vaccine % % % % Total purchases of raw materials for breeding Kampung chickens 13, % 14, % 7, % 7, % Purchases of live Kampung chickens % % % 1, % Total purchases of raw materials for breeding and sales of Kampung chicken 14, % 15, % 7, % 9, % 7

16 SUMMARY Year ended 31 March Six months ended 30 September RM 000 %of total cost of sales RM 000 %of total cost of sales RM 000 %of total cost of sales RM 000 %of total cost of sales (Unaudited) Purchases of non-chicken meat products 4, % 10, % 2, % 7, % Closing inventories (3,089) (2.7%) (3,490) (2.4%) (2,233) (3.3%) (4,060) (4.9%) Cost of materials consumed 93, % 121, % 56, % 69, % Direct labour 4, % 5, % 2, % 3, % Slaughtering service fees 5, % 5, % 2, % 3, % Rental and utilities 1, % 1, % % 1, % Depreciation % 1, % % % Repair and maintenance 1, % 1, % 1, % % Transportation costs % % % % Others % % % % Biological assets fair value adjustments 5, % 5, % 3, % 3, % Total 113, % 143, % 67, % 82, % KEY FINANCIAL RATIOS As at/for the six months As at/for the year ended 31 March ended 30 September Profitability ratios Return on total assets (Note 1) (Note 8) 6.6% 7.3% N/A Return on equity (Note 2) (Note 8) 19.8% 19.8% N/A Liquidity ratios Current ratio (times) (Note 3) Quick ratio (times) (Note 4) Capital adequacy ratios Gearing ratio (Note 5) 131.8% 106.2% 77.2% Debt-to-equity ratio (Note 6) 107.4% 74.9% 36.4% Interest coverage ratio (times) (Note 7) Notes: Return on total assets is calculated by profit after taxation for the year/period divided by the total assets as at the respective year/period end and multiplied by 100%. 2. Return on equity is calculated by profit after taxation for the year/period divided by the total equity as at the respective year/period end and multiplied by 100%. 3. Current ratio is calculated based on the total current assets divided by the total current liabilities as at the respective year/period end. 4. Quick ratio is calculated based on the total current assets less inventories and biological assets divided by the total current liabilities as at the respective year/period end. 5. Gearing ratio is calculated based on the total debt divided by the total equity as at the respective year/period end and multiplied by 100%. 6. Debt-to-equity ratio is calculated based on net debt at the end of the year/period divided by total equity at the end of the respective year/period multiplied by 100%. 7. Interest coverage ratio is calculated based on the net profit before interest and tax for the respective year/period divided by the interest expenses for the respective year/period. 8 This semi-annual number is not meaningful as it is not comparable to the annual numbers. For details of the financial ratios of our Group during the Track Record Period, please refer to the section headed Financial information Key financial ratios of this document. DIVIDENDS During the Track Record Period, our Group did not declare any dividends. Our Group currently does not have any specific dividend policy. Dividends may be paid out by way of cash or by other means that our Directors consider appropriate. The declaration of future dividends will be subject to the discretion of our Board and approval of our Shareholders and will depend on our earnings, financial condition, cash requirement and availability and any other factors our Directors may deem relevant. As such factors and the payment of dividends are at the discretion of our Board, there can be no assurance that any particular dividend amount or any dividend at all, will be declared and paid in the future. Prospective investors should note that historical dividend payments should not be regarded as an indication of our future dividend. 8

17 SUMMARY RECENT DEVELOPMENTS AND MATERIAL ADVERSE CHANGE The Halal Certificate of one of our subsidiaries in Singapore, namely Boong Poultry, has been suspended from 1 September 2017 onwards by the Majilis Ugama Islam Singapura of Singapore. Our Group made a resubmission of renewal of its Halal Certificate on 5 January In January 2018, the lease of one of the four MyGAP-certified breeding farms for Kampung chickens approved by the Agri-Food & Veterinary Authority of Singapore managed and run by our Group was terminated. Since December 2017, we have been negotiating with an independent third party for a lease of another MyGAP-certified breeding farm approved by the Agri-Food & Veterinary Authority of Singapore, which, if successfully obtained by our Group, will serve as a replacement for the said terminated breeding farm. On 23 January 2018, Aqina Holdings entered into a memorandum of understanding with Mutiara pursuant to which both parties shall negotiate in good faith for Aqina Holdings acquisition of Mutiara s 49% shareholding in Wilayah. Such transaction has not yet been completed up to the date of this document. Subsequent to the Track Record Period and up to the Latest Practicable Date, save for expenses incurred in relation to the [REDACTED] as disclosed in the paragraph headed Reasons for [REDACTED] in Hong Kong and [REDACTED] Expenses in this section, we did not have any significant non-recurrent items in our consolidated statement of profit or loss and other comprehensive income. Based on our Group s unaudited management accounts, the monthly average revenue for the two months ended 30 November 2017 was slightly higher than the monthly average revenue for FY2017. Given the above, our Directors confirm that there has not been any material adverse change in our Group s financial and trading position and prospects subsequent to the Track Record Period and up to the date of this document. FUTURE PLANS AND USE OF PROCEEDS Based on the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] per [REDACTED] to HK$[REDACTED] per [REDACTED], we will receive gross proceeds of approximately HK$[REDACTED]. The net proceeds from the [REDACTED] are estimated to be approximately HK$[REDACTED], after deducting the underwriting fees and other estimated expenses payable by our Company in connection thereto. We intend to apply such net proceeds from the [REDACTED] as follows: Approximate amount of net proceeds HK$[REDACTED] or [REDACTED]% HK$[REDACTED] or [REDACTED]% Intended usage Acquisition of a parcel of land for establishment of new halal-certified processing plant and cold-room facilities in Malaysia Establishing a new halal-certified processing plant and cold-room facilities in Malaysia and recruitment of additional staff Utilised by year/period ending 30 September March 2020 HK$[REDACTED] or Expansion of our business horizontally 31 March 2019 [REDACTED]% HK$[REDACTED] or Expansion of our vehicle fleet and 31 March 2020 [REDACTED]% recruitment of additional staff HK$[REDACTED] or [REDACTED]% General working capital 30 September 2018 For details of our future plans, and use of proceeds, please refer to the section headed Future Plans and Use of Proceeds of this document. [REDACTED] STATISTICS Based on the minimum [REDACTED] of HK$[REDACTED] per Share Based on the maximum [REDACTED] of HK$[REDACTED] per Share Market capitalisation (Note 1) HK$[REDACTED] HK$[REDACTED] Unaudited pro forma adjusted combined net tangible assets of our Group attributed to equity owners of our Company per Share (Note 2) HK$[REDACTED] HK$[REDACTED] 9

18 SUMMARY Notes: 1. The calculation of our market capitalisation is based on [REDACTED] Shares which will be in issue immediately following the completion of the Capitalisation Issue and the [REDACTED], but takes no account of any options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by Company pursuant to the general mandate to issue shares and general mandate to repurchase shares as described in the section headed Share Capital of this document. 2. The unaudited pro forma adjusted combined net tangible assets of our Group attributed to equity owners of our Company per Share has been prepared with reference to certain estimation and adjustment, and has been adjusted to show the effect of the [REDACTED] Investment. Please refer to Appendix II to this document for further details. RISK FACTORS We believe that there are certain risks involved in our business and operations. They can be classified into: (i) risks relating to our business; (ii) risks relating to the industry in which we operate; (iii) risks relating to conducting business in Malaysia and Singapore; (iv) risks relating to the [REDACTED] and our Shares; and (v) risks relating to statements made in this document. We believe that our major risks include: Outbreak of animal diseases could adversely affect our business; We rely on a continuous supply of live broilers; Our business and reputation may be affected by quality and safety issues caused by the quality of (i) DOCs; (ii) chicken feeds; and (iii) vaccines and medicines applied to the DOCs and live chickens; We may encounter interruption in the supply or fluctuation in the price of DOCs and chicken feeds; and The fair value of our biological assets may fluctuate significantly from period to period, causing our results of operations to be highly volatile. A detailed discussion of the risk factors is set forth in the section headed Risk Factors of this document. Prospective investors should read the section headed Risk Factors in its entirety before making any investment decision in the [REDACTED]. REASONS FOR [REDACTED] IN HONG KONG AND [REDACTED] EXPENSES Our Group is applying for [REDACTED] in Hong Kong because it gives us long-term advantages to our business expansion due to the favourable environment in Hong Kong, including its well established legal system, high level of internationalisation, freedom of flow of capital and information, and its maturity in the global financial market. Our Directors believe that the access to international funding will underpin our Group s future sustainable growth by providing us with diversified means to fund our future expansion plans. On the contrary, the sole reliance on organic growth funding via self-operation will impose constraints on the overall growth of our Group. The [REDACTED] would help raise the awareness and publicity of our Aqina brand, information transparency that builds up trust and confidence for potential and existing customers. In addition, our Directors also believe that customers may prefer to do business with a [REDACTED] company given its reputation, [REDACTED] status, public financial disclosures and general regulatory supervision by relevant Hong Kong regulatory bodies. Despite our Group has no nexus to Hong Kong or the PRC market and the high [REDACTED] expenses over the gross proceeds to be raised, our Directors believe that [REDACTED] in Hong Kong allows us higher liquidity and greater exposure to a wider analyst and investment community. Furthermore, given that Hong Kong has a stable currency pegged to USD, the [REDACTED] will enable our Group to have access to stable capital market for future fund raising should such need arise. Owing to the aforementioned reasons, our Directors are of the view that the [REDACTED] would enable our Group to strengthen our market position in the chicken production industry in Malaysia and Singapore. For the FY2016 and FY2017, we did not incur any [REDACTED] expenses. For the six months ended 30 September 2017, we incurred [REDACTED] expenses of approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]). We expect to incur total [REDACTED] expenses of approximately RM[REDACTED] million (equivalent to approximately HK$[REDACTED] million) of which our Group (i) has recognised approximately RM[REDACTED] (equivalent to approximately HK$[REDACTED]) in the profit or loss for the six months ended 30 September 2017; (ii) expects to recognise approximately RM[REDACTED] million (equivalent to approximately HK$[REDACTED] million) in the profit or loss for the six months ending 31 March 2018; (iii) expects to recognise approximately RM[REDACTED] million (equivalent to approximately HK$[REDACTED] million) in the profit or loss for the year ending 31 March 2019; and (iv) expects to recognise approximately RM[REDACTED] million (equivalent to approximately HK$[REDACTED] million) as a deduction in equity directly for the year ending 31 March Expenses in relation to the [REDACTED] are non-recurring in nature. Our Group s financial performance and result of operations for the six months ended 30 September 2017 have been, and the year ending 31 March 2018 and 2019 will be, significantly and adversely affected by the expenses in relation to the [REDACTED]. 10

19 DEFINITIONS Unless the context otherwise requires, the following expressions have the following meanings in this document. Certain other terms are explained in the section headed Glossary of Technical Terms of this document. Accountants Report the accountants report of our Group prepared by the Reporting Accountants set out in Appendix I to this document affiliate(s) any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person Alpha Element Alpha Element Limited, a company incorporated in the BVI with liability limited by shares on 28 August 2017, which is an indirect wholly-owned subsidiary of our Company after the Reorganisation [REDACTED] Articles of Association or Articles associate(s) Audit Committee Aqina Farming Aqina Holdings Aqinajaya the amended and restated articles of association of our Company conditionally adopted on [19 March 2018] and with effect from the [REDACTED], a summary of which is set out in Appendix III to this document, and as amended from time to time has the meaning ascribed to it under the GEM Listing Rules the audit committee of our Board Aqina Farming Sdn. Bhd., a private company limited by shares incorporated in Malaysia on 9 January 2009, and an indirect wholly-owned subsidiary of our Company Aqina Holdings Sdn. Bhd., a private company limited by shares incorporated in Malaysia on 25 September 2007 and an indirect wholly-owned subsidiary of our Company Aqinajaya Sdn. Bhd., a private company limited by shares incorporated in Malaysia on 28 January 2005 and an indirect wholly-owned subsidiary of our Company Aqina Poultry Aqina Poultry Sdn. Bhd., previously known as Boong Farming Sdn. Bhd. and Aqina Feedmill Sdn. Bhd., a private company limited by shares incorporated in Malaysia on 25 September 2007 and an indirect wholly-owned subsidiary of our Company 11

20 DEFINITIONS Aqina Trading Boong Farming Boong Food Boong Poultry Board or Board of Directors Business Day(s) or business day(s) BVI CAGR Capitalisation Issue CCASS CCASS Clearing Participant CCASS Custodian Participant Aqina Trading Sdn. Bhd., previously known as Aqina Biotech Industries Sdn., Bhd., a private company limited by shares incorporated in Malaysia on 14 September 2015 and an indirect wholly-owned subsidiary of our Company Boong Farming Trading Sdn. Bhd., a private company limited by shares incorporated in Malaysia on 19 June 2009 and an indirect wholly-owned subsidiary of our Company Boong Food Pte. Ltd., a private company limited by shares incorporated in Singapore on 5 February 2016 and an indirect wholly-owned subsidiary of our Company Boong Poultry Pte. Ltd., a private company limited by shares incorporated in Singapore on 11 March 1994 and an indirect wholly-owned subsidiary of our Company the board of Directors a day on which banks in Hong Kong are generally open for business to the public and which is not (i) a Saturday, Sunday or public holiday in Hong Kong or (ii) a day on which a tropical cyclone warning signal no. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m. the British Virgin Islands compound annual growth rate the allotment and issue of [REDACTED] new Shares to be made upon capitalisation of certain sums standing to the credit of the share premium account of our Company referred to in the section headed A. Further information about our Company and our subsidiaries 3. Written resolutions of our Shareholders in Appendix IV to this document the Central Clearing and Settlement System established and operated by HKSCC a person admitted to participate in CCASS as a direct clearing participant or general clearing participant a person admitted to participate in CCASS as a custodian participant 12

21 DEFINITIONS CCASS Investor Participant CCASS Operational Procedures a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation the operational procedures of HKSCC in relation to CCASS, containing the practices, procedures and administrative requirements relating to the operations and functions of CCASS, as from time to time in force CCASS Participant a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant close associate(s) Companies Law or Cayman Companies Law Companies Ordinance Companies (Winding Up and Miscellaneous Provisions) Ordinance Company or our Company connected person(s) Controlling Shareholder(s) Corporate Governance Code Dato Tan Datin Teo has the meaning ascribed to it under the GEM Listing Rules the Companies Law (as revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, modified or supplemented from time to time Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, modified or supplemented from time to time Aqina International Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability on 25 October 2017 has the meaning ascribed to it under the GEM Listing Rules has the meaning ascribed to it under the GEM Listing Rules and in the case of our Company, refer to Dato Tan, Datin Teo, Upon Global Investments and Stanmer Investments the Corporate Governance Code as set out in Appendix 15 to the GEM Listing Rules Dato Tan Chin Long, spouse of Datin Teo, father of Mr. Wesley Tan, brother of Mr. Tan Ah Kok, Mr. Tan Teck Seng and Mr. Tan Siow Cheng, our executive Director and a Controlling Shareholder Datin Teo Siew Giok, spouse of Dato Tan, mother of Mr. Wesley Tan, our executive Director and a Controlling Shareholder 13

22 DEFINITIONS Deed of Indemnity Deed of Non-competition Director(s) Fresh Hub Group the deed of indemnity dated [19 March 2018] entered into between each of the Controlling Shareholders in favour of our Company (for itself and as trustee for each of its subsidiaries), the particulars of which are set out in the paragraph headed E. Other information 1. Tax and other indemnities in Appendix IV to this document the deed of non-competition dated [19 March 2018] entered into by our Controlling Shareholders in favour of our Company (for itself and as trustee for each of its subsidiaries), the particulars of which are set out in the paragraph headed Relationship with our Controlling Shareholders Non-competition undertakings of this document the director(s) of our Company a group of companies consisting of Hup Heng (Kulai) Trading Sdn. Bhd., Hup Heng (KT) Trading Sdn. Bhd., Hup Heng (JB) Trading Sdn. Bhd., Fresh Hub Trading (PG) Sdn. Bhd. Hup Heng Supply & Trading Sdn. Bhd. and Fresh Hub Trading Sdn. Bhd. FY2016 the financial year ended 31 March 2016 FY2017 the financial year ended 31 March 2017 FY2018 the financial year ending 31 March 2018 Gallus (Hong Kong) Gallus Investments GEM GEM Listing Rules General Rules of CCASS Gallus (Hong Kong) Limited, a company incorporated in Hong Kong on 21 August 2017 with limited liability and an indirect wholly-owned subsidiary of our Company Gallus Investments Limited, a company incorporated in the BVI on 11 August 2017 with liability limited by shares, and a direct wholly-owned subsidiary of our Company after the Reorganisation the Growth Enterprise Market of the Stock Exchange the Rules Governing the Listing of Securities on GEM, as amended, supplemented or otherwise modified from time to time the terms and conditions regulating the use of CCASS, as may be amended or modified from time to time and where the context so permits, shall include the CCASS Operational Procedures [REDACTED] 14

23 DEFINITIONS Group, our Group, we, us or our our Company and our subsidiaries at the relevant time or, where the context otherwise requires, in respect of the period prior to our Company becoming the holding company of its present subsidiaries pursuant to the Reorganisation, its present subsidiaries [REDACTED] HKSA HKSCC HKSCC Nominees HK$ or Hong Kong dollar(s) or HKD or cents Hong Kong or HK Hong Kong Share Registrar IASB IFRSs Independent Third Party(ies) Ipsos Ipsos Report Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants Hong Kong Securities Clearing Company Limited HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC Hong Kong dollars and cents respectively, the lawful currency for the time being of Hong Kong The Hong Kong Special Administrative Region of the PRC [REDACTED], our Hong Kong branch share registrar and transfer office International Accounting Standards Board International Financial Reporting Standards issued by IASB individual(s) or company(ies) who is (or are) not a connected person (within the meaning of the GEM Listing Rules) of our Company, any of its subsidiaries or any of their respective associates Ipsos Limited, an independent industry consultant engaged by our Company an independent market research report in respect of the chicken farming and processing industry in Malaysia, prepared by Ipsos which was commissioned by our Company JLL or Jones Lang LaSalle Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent biological asset valuer engaged by our Company kg kilogram 15

24 DEFINITIONS Latest Practicable Date laws Licenced Slaughterhouse in Singapore or Slaughterhouse 26 January 2018, being the latest practicable date for the purpose of ascertaining certain information in this document prior to its publication include all laws, rules, regulations, guidelines, opinions (whether formally published or not), notices, circulars, orders, judgements, decrees or rulings of any court, government, governmental or regulatory authority whether or not ejusdem generis with any of the foregoing (including, without limitation, the Stock Exchange) and law shall be construed accordingly a licenced slaughterhouse in Singapore owned and operated by Soonly Food, an Independent Third Party [REDACTED] Listing Division Main Board Malaysian Legal Advisers Memorandum of Association or Memorandum Mutiara Mr. Lim Mr. Ngai Mr. Wong the listing division of the Stock Exchange the Main Board of the Stock Exchange David Lai & Tan, the legal advisers to our Company as to Malaysian law the amended and restated memorandum of association of our Company conditionally adopted on [19 March 2018] and with effect from the [REDACTED], a summary of which is set out in Appendix III to this document, and as amended from time to time Mutiara Jaya Trading Sdn. Bhd., a limited liability company incorporated in Malaysia on 26 December 2012 and the shares of which are owned as to 25% by each of Mr. Lim, who is a connected person of our Company, his spouse Ms. Hoo Shok Ling and his brother-in-law Mr. Hoo Chuan Haw and sister-in-law Ms. Hoo Shok Wei. Mutiara is a connected person of our Company at subsidiary level Mr. Lim Yew Ann, a former director of Wilayah Food Trading who resigned on 23 January 2018 Mr. Ngai Wah Sang, a [REDACTED] investor investing in our Group through Ruby Garden Global Mr. Wong Chin Chuan, our executive Director and chief executive officer 16

25 DEFINITIONS Mr. Wesley Tan Nomination Committee Mr. Wesley Tan Seah Ging, son of Dato Tan and Datin Teo, our executive Director the nomination committee of our Board [REDACTED] [REDACTED] Underwriters the underwriters that are expected to enter into the [REDACTED] Underwriting Agreement to underwrite the [REDACTED] [REDACTED] Underwriting Agreement PRC or China [REDACTED] Investment the underwriting agreement expected to be entered into on or about [REDACTED] by, among others, our Company, our Controlling Shareholders, our executive Directors, the Sole Sponsor, the [REDACTED], the [REDACTED] and the [REDACTED] Underwriters relating to the [REDACTED] the People s Republic of China, for the purpose of this document, shall exclude Hong Kong, the Macau Special Administrative Region and Taiwan the [REDACTED] investment in our Group as set out in the section headed History, Reorganisation and Corporate Structure [REDACTED] Investment of this document [REDACTED] 17

26 DEFINITIONS [REDACTED] [REDACTED] Underwriters [REDACTED] Underwriting Agreement Regulation S Remuneration Committee Reorganisation Reorganisation Agreement Reporting Accountants the underwriters of the [REDACTED], whose names are set out under the paragraph headed Underwriting [REDACTED] Underwriters of this document the underwriting agreement dated [REDACTED] entered into among our Company, our Controlling Shareholders, our executive Directors, the Sole Sponsor, the [REDACTED], the [REDACTED] and the [REDACTED] Underwriters relating to the [REDACTED] Regulation S under the U.S. Securities Act the remuneration committee of our Board the corporate reorganisation of our Group conducted in preparation for the [REDACTED], details of which are set out in the section headed History, Reorganisation and Corporate Structure of this document the reorganisation agreement dated [19 March 2018] entered into by our Company (as purchaser) with Upon Global Investments, Stanmer Investments and Ruby Garden Global (as vendors) in relation to the acquisition of all the issued shares of Gallus Investments by our Company Mazars CPA Limited and Mazars LLP 18

27 DEFINITIONS [REDACTED] [REDACTED] RM or Malaysian dollar(s) Ruby Garden Global SFC or Securities and Futures Commission SFO or Securities and Futures Ordinance SGD or S$ Share(s) Malaysian ringgit, the lawful currency of Malaysia Ruby Garden Global Limited, a company incorporated in the BVI with liability limited by shares on 4 July 2017, which is wholly-owned by Mr. Ngai and through which Mr. Ngai invested in our Group the Securities and Futures Commission of Hong Kong the Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong) of Hong Kong, as amended, supplemented or otherwise modified from time to time Singapore dollar, the lawful currency of Singapore ordinary share(s) of par value HK$0.01 each in the share capital of our Company [REDACTED] Share Option Scheme the share option scheme conditionally adopted by our Company on [19 March 2018], the principal terms of which are summarised under the paragraph headed D. Share Option Scheme in Appendix IV to this document Shareholder(s) Singaporean Legal Advisers Slaughtering Plant in Malaysia shareholder(s) of our Company from time to time Valensea Law LLC, the legal advisers to our Company as to Singaporean law our halal-certified slaughtering cum processing plant under Wilayah Food Trading located at no.3, Jalan Usaha 2, Lorang Usaha Utama, Tmn Perindustrian Ulu Choh, Pontian, Johor, Malaysia 19

28 DEFINITIONS Soonly Food Stanmer Investments Stock Exchange subsidiary(ies) Substantial Shareholder(s) Takeovers Code Soonly Food Processing Industries Pte. Ltd., a company incorporated in Singapore with liability limited by shares on 6 July 1991, which is wholly-owned by an Independent Third Party Stanmer Investments Limited, a company incorporated in the BVI with liability limited by shares on 13 July 2017, which is wholly-owned by Datin Teo, our executive Director and a Controlling Shareholder The Stock Exchange of Hong Kong Limited has the meaning ascribed thereto under the GEM Listing Rules has the meaning ascribed to it under the GEM Listing Rules the Codes on Takeovers and Mergers and Share Repurchases issued by the SFC, as amended, supplemented or otherwise modified from time to time Track Record Period comprises FY2016, FY2017 and the six months ended 30 September 2017 [REDACTED] Underwriting Agreements the [REDACTED] Underwriting Agreement and the [REDACTED] Underwriting Agreement Upon Global Investments U.S. or United States US$ or USD Upon Global Investments Limited, a company incorporated in the BVI with liability limited by shares on 5 July 2017, which is wholly-owned by Dato Tan, our executive Director and a Controlling Shareholder the United States of America, its territories, its possessions and all areas subject to its jurisdiction United States dollars, the lawful currency of United States U.S. Securities Act the United States Securities Act of 1933, as amended, supplemented or otherwise modified from time to time and the rules and regulations promulgated thereunder Wilayah Food Trading Wilayah Food Trading Sdn. Bhd., a private company limited by shares incorporated in Malaysia on 25 March 2014 and an indirect non-wholly owned subsidiary of our Company [REDACTED] 20

29 DEFINITIONS [REDACTED] % per cent. Certain amounts and percentage figures included in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them. Certain figures used in this document that are expressed in HK$ or RM are calculated based on the conversion rate as at 17 January 2018 of RM1.00 = HK$1.98, SGD1.00 = HK$5.90 and SGD1.00 = RM

30 GLOSSARY OF TECHNICAL TERMS This glossary contains explanations of certain terms and definitions used in this document in connection with our Group and our business. The terms and their meanings may not correspond to standard industry meaning or usage of those terms. broiler chicken(s) or broiler(s) chicken(s) chicken meat product(s) a variety of chicken breeds and reared specifically for meat production. Broilers typically have white feathers and pale-yellow skin. Broilers are globally the most common type of chicken meat consumed, particularly for commercial chicken production, due to mass industrial breeding of this variety for their shorter rearing time to reach harvest-stage, higher egg yields, and higher carcass meat yield per chicken. Some well-known broiler breeds include Cobb, Ross, Hubbard, Shaver, Arbor Acres, Hybro, Avian, amongst others refer to both broilers and Kampung chickens refer to chicken meat product(s) produced from Kampung chickens or broilers chilled chicken(s) slaughtered and packaged chicken(s) stored at between 1 C and 10 C after going through a chilling process and has a shelf-life of 5 to 7 days. The packaging is typically air-tight with a laser stamp Contract Farmer(s) Contract Farm(s) DOC(s) frozen chicken(s) Good Manufacturing Practices GDP the farmer(s) who entered into contract(s) with us for rearing broilers the farm(s) which are run by the Contract Farmer(s) day old chick(s), the chick(s) hatched from broiler egg(s) or Kampung chicken egg(s) which are then delivered to our breeding farm(s) or the Contract Farm(s) for breeding into broiler(s) or Kampung chicken(s) slaughtered and packaged chicken(s) stored below -18 C after going through a freezing process and has a shelf-life of up to 12 months. Frozen chicken(s) are typically stored in air-tight or plastic freezer bags a programme that outlines the minimum common hygiene and processing requirements applicable to all food processing establishment and intended as the foundation towards achieving higher food safety management systems like Hazard Analysis and Critical Control Point (HACCP) and ISO 22000: 2005 gross domestic product 22

31 GLOSSARY OF TECHNICAL TERMS GST goods and services tax, a value-added tax levied on most goods and services sold for domestic consumption in Malaysia halal food food that followed the requirements which have been imposed by Islamic Laws on food and goods, i.e. food that neither consists nor contains any part of an animal that is prohibited by Islamic laws or has not been slaughtered in accordance with Islamic Laws Halal Certificate(s) harvest-stage Islamic Laws Halal certificate is a process which ensures the features and qualities of the products comply with the rules established by the approved certification body in the country of origin that allow the use of the mark halal. The approved certification body in Malaysia and Singapore is the Department of Islamic Development Malaysia (JAKIM) and the Islamic Religious Council of Singapore (MUIS), respectively. Specifically, for meat products, halal certifies that animals were slaughtered, deboned and packaged, stored and transported in a halal manner fully-grown chickens which are ready for slaughtering. These chickens are considered to be harvested when taken out of breeding farms Islamic Laws are applicable to all countries of origin, of which every Muslim shall adhere to as an ethical code and principle of life, which is mainly derived from the Quran and the Hadith. It comprises a comprehensive outlook on life of a Muslim towards his or herself, family, neighbours, community, city, nation and the Muslim polity as a whole ISO International Organisation for Standardisation, a non-government organisation based in Geneva, Switzerland, for assessing the quality systems of business organisations ISO 22000:2005 an internationally recognised standard for a quality food safety management system 23

32 GLOSSARY OF TECHNICAL TERMS Kampung chicken(s) MeSTI MeSTI Certificate(s) MyGAP Kampung chicken is synonymous with the Ayam Kampung indigenous chicken breeds in Malaysia and Indonesia, and also includes other coloured chicken varieties such as Sasso chickens. The name directly translates to free-range chicken or village chicken, that is often reared as free-range chickens by village households for local sustenance. They are typically a slow-growing breed compared to broiler chickens, and have varying physical characteristics. Due to the low egg production and slow growth of Kampung chicken, these birds reach slaughter weight much later compared to broilers, and hence, the chicken meat of Kampung chickens fetches higher prices than broiler meat. Makanan Selamat Tanggungjawab Industri, or Food Safety is the Responsibility of the Industry, a food safety programme under the Malaysia Economic Transformation Programme undertaken by the Ministry of Health of Malaysia in The objective of MeSTI is to put in place a system for the maintenance of food hygiene and process control which includes food safety assurance and food traceability and serve as a building block for micro and Small and Medium Enterprises (SMEs) in Malaysia to be a major producer and exporter of food products by facilitating food safety and quality compliance certificate(s) issued to enterprise(s) which fulfil the standards and requirements set out by MeSTI for livestock industry, MyGAP certification is implemented based on Good Animal Husbandry Practice (GAHP) which is a set of compulsory standards relevant with the chicken production industry in Malaysia. There are a set of guidelines in seven aspects, including herd health, use of medication, bio-security, farm infrastructure, management record, waste management and pollution control, and sanitation. It is a comprehensive programme which covers all practices operated by chicken farms, including use of chicken feed and vaccines and number of chickens raised per area unit This glossary contains explanations of certain terms and definitions used in this document in connection with our Group and our business. The terms and their meanings may not correspond to standard industry meaning or usage of those terms. 24

33 FORWARD-LOOKING STATEMENTS This document contains certain statements and information that are forward-looking and uses forward-looking terminology such as anticipate, believe, could, estimate, expect, may, ought to, should or will or similar terms, in particular, in the sections headed Business, Risk Factors and Financial Information in this document in relation to future events, our future financial, business or other performance and development, the future development of our industry and the future development of the general economy of our key markets. These statements are based on various assumptions regarding our present and future business strategy and the environment in which we will operate in the future. These forward-looking statements reflecting our current views with respect to future events are not a guarantee of future performance and are subject to certain risks, uncertainties and assumptions including the risk factors described in this document and the following: our business and operating strategies and the various measures to implement such strategies; our dividends; our operations and business prospects, including development plans for its existing and new businesses; the future competitive environment for the industries in which we operate; the regulatory environment as well as the general industry outlook for the industries in which we operate; changes on the fair value less costs to sell of our biological assets; future developments in the industries in which we operate; the effects of the global financial markets and economic crisis; and other factors beyond our control. Subject to the requirements of applicable laws, rules and regulations and the GEM Listing Rules, we do not have any obligation to update or otherwise revise the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this document might not occur in the way we expect, or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements contained in this document are qualified by reference to the cautionary statements set out in this section. In this document, unless otherwise stated, statements of or references to our intentions or those of any of our Directors are made as at the date of this document. Any such intentions may change in light of future developments. 25

34 RISK FACTORS You should consider carefully all the information set out in this document and, in particular, should consider and evaluate the following risks and uncertainties associated with an investment in our Company before making any investment decision in relation to our Company. The business, financial position, or results of business operation of our Group can be materially and adversely affected by any of these risks. The market price of the Shares could fall significantly and you may lose all or part of your investment. We believe that there are certain risks involved in our business and operations. They can be classified into: (i) risks relating to our business; (ii) risks relating to the industry in which we operate; (iii) risks relating to conducting business in Malaysia and Singapore; (iv) risks relating to the [REDACTED] and our Shares; and (v) risks relating to statements made in this document. RISKS RELATING TO OUR BUSINESS We rely on a continuous supply of live broilers During the Track Record Period, broilers sold by us were either purchased from live broiler suppliers or Contract Farmers where the sourcing and sales of broilers represented approximately 74.3%, 73.0% and 72.3% of our total revenue for FY2016, FY2017 and the six months ended 30 September 2017 respectively. A continuous supply of live broilers is therefore crucial to our business. Our management set out the schedule to purchase and collect harvested broilers from live broilers suppliers and Contract Farmers to ensure that live broilers will be delivered to our Slaughtering Plant in Malaysia and our processing facilities on a timely basis. We expect to continue to rely on these suppliers for the supply of broilers harvested for our live broilers and broiler meat products. However, apart from the contracts with our Contract Farmers, we have not entered into any master framework agreement, long-term agreement or supply contract with most of our live broiler suppliers. During the Track Record Period, we had not experienced any material interruptions in the supply of live broilers which would adversely affect our business operations. However, in the event that the supply of live broilers is interrupted due to any unforeseen reason whatsoever or if there is a significant increase in the costs of procuring broilers, our production will have to be suspended and our business will be adversely affected. The total purchases of procuring broilers amounted to approximately RM74.2 million, RM95.3 million and RM53.3 million for FY2016, FY2017 and the six months ended 30 September 2017, respectively, representing approximately 75.1%, 74.7% and 72.8% of our total purchases for FY2016, FY2017 and the six months ended 30 September 2017, respectively. As mentioned above, apart from entering into agreements with our Contract Farmers, we have not entered into any fixed term supply contracts with most of the live broilers suppliers. If the live broilers suppliers stop supplying broilers to our Group, we may not be able to satisfy customers demand and hence our reputation and business operation will be affected. 26

35 RISK FACTORS Our business and reputation may be affected by quality and safety issues caused by the quality of (i) DOCs; (ii) chicken feeds; and (iii) vaccines and medicines applied to DOCs and live chickens We rely heavily on our quality control system and have implemented various measures to ensure the quality and safety of our live chickens or chicken meat products. However, there is no assurance that our live chickens or chicken meat products will not be affected by the quality of our DOCs and chicken feed or contaminated as a result of tampering by unauthorised third parties or during the various stages of the procurement and production process. We cannot guarantee against potential future failures in our quality control system. Qualities and safety of our live chickens and chicken meat products may be adversely affected when safety equipment malfunctions. Such failures may result in our delivery of subpar quality live chickens or chicken meat products to our customers, which can cause us monetary losses and damage to our reputation. Although we require our DOC, chicken feed, medicine and vaccine suppliers to possess the relevant certificates, we cannot guarantee that the quality of such DOCs, chicken feeds or that the side effects of such medicines and vaccines will be fully made known to us. In the event that any of our live chickens or chicken meat products is affected by the quality and/or safety of DOCs, chicken feeds, medicines or vaccines which results in any human health, food safety or quality issues, we may face product liability claims from our customers and/or the end-consumers. Any product liability claim made or threatened to be made against us in the future, regardless of its merits, could result in costly litigation and adverse publicity and put strain on our administrative and financial resources. Such incidents will also affect the confidence of our customers and end-consumers in our live chickens and products, which will in turn adversely affect our business. We may encounter interruption in the supply or fluctuation in the price of DOCs and chicken feeds The prices of DOCs and chicken feeds may experience volatility and are affected by various factors. For example, the price of chicken feeds may be affected by the weather conditions and harvest conditions of the raw materials such as corn and soybeans. Further, chicken feeds costs have historically been correlated with the prices of corn and soybeans. In Malaysia, these commodities are imported from around the world and settled by USD, and thus the price is susceptible to foreign exchange volatility. Our results of operation are subject to such price volatility of in the future. For FY2016, FY2017 and the six months ended 30 September 2017, the purchase of the Kampung chicken feeds were approximately RM9.6 million, RM10.0 million and RM5.3 million respectively, representing approximately 69.4%, 66.9% and 69.0% of our total purchases of raw materials for breeding Kampung chickens, respectively. The purchase of Kampung chicken DOCs were approximately RM3.4 million, RM4.0 million and RM1.9 million respectively, representing approximately 24.7%, 27.1% and 25.4% of the total purchases of raw materials for breeding Kampung chickens during the same period respectively. Accordingly, any significant increase in the prices of the DOCs and/or chicken feeds will increase the operation costs and hence have an adverse impact on the profitability of our business. Furthermore, any increase in the prices of broiler DOCs may also lead to increase in the purchase price of broilers if our suppliers shift the increase in prices to us. 27

36 RISK FACTORS Further, we have not entered into any master framework agreement, long-term agreement or supply contract with most of the chicken feed suppliers. In the event that we are unable to maintain the relationships with these suppliers or these suppliers refuse to continue to supply chicken feeds to us due to any reason whatsoever, we will have to procure chicken feeds from other suppliers and our operation may be interrupted. The fair value of our biological assets may fluctuate significantly from period to period, causing our results of operations to be highly volatile We have significant biological assets comprising live Kampung chickens which were stated at fair value less costs to sell as at the relevant valuation dates in accordance with IFRSs. Our biological assets were valued at approximately RM2.0 million, RM2.4 million and RM2.4 million as at 31 March 2016, 31 March 2017 and 30 September 2017, respectively, representing approximately 3.4%, 3.3% and 2.8% of our Group s total assets of approximately RM61.0 million, RM74.0 million and RM85.2 million as at the above dates, respectively. Fair value gains or losses (including unrealised fair value gains or losses) with respect to our biological assets, which are non-cash in nature, are attributable to changes in the physical characteristics of our Kampung chickens (for example, growth from DOCs to Kampung chickens) or changes in market prices for Kampung chickens. The fair values of our biological assets at each reporting date during the Track Record Period were determined by an independent valuer and we intend to engage an independent valuer to determine the fair values of our biological assets going forward. In valuing our biological assets, JLL has relied on a number of major parameters and assumptions which may vary from time to time, such as quantity and body weight of Kampung chickens and market price of Kampung chickens, which may be affected by future trends in political, legal and economic conditions in Malaysia and Singapore. For further details, please refer to the section headed Financial Information Valuation of Biological Assets. The fair value of our Kampung chickens could be affected by factors including the accuracy of those parameters and assumptions, as well as the quality of our Kampung chickens and changes in the chicken production industry. As a result of revaluations of our biological assets from period to period, our financial position and results of operations may change significantly from period to period. In addition, an increase or decrease in market prices for broilers or Kampung chickens will also increase or reduce our revenue and cost of sales, which makes our reported profit more volatile. During the Track Record Period, the fair value changes of our biological assets which were recognised in cost of sales amounted to approximately RM5.9 million, RM5.7 million and RM3.8 million, respectively. Due to the fair value changes of our biological assets, a net gain resulting from fair value changes of biological assets amounted to approximately RM375,000 for FY2017, while a net loss resulting from fair value changes of biological assets amounted to approximately RM11,000 and RM459,000 for FY2016 and the six months ended 30 September 2017, respectively. Although we may recognise fair value gains from increases in the fair value of our biological assets, these changes will not represent changes in our cash position as long as the relevant assets continue to be held by us. For further details, please refer to the section headed Financial Information Factors affecting our financial condition and results of operations Change in fair value of biological assets. 28

37 RISK FACTORS We solely rely on our service provider, Soonly Food who operates the Licenced Slaughterhouse in Singapore, to provide slaughtering services to us in Singapore. Any change of business relationship with Soonly Food or increase of their slaughtering fees would adversely affect our operations and financial results in Singapore According to the Ipsos Report, the chicken slaughtering industry in Singapore is minimal with only 10 licenced slaughterhouses as of 2016, among which the majority were owned or in partnership with Malaysian chicken production companies (the One-stop Chicken Production Companies ). Slaughterhouses controlled by these One-stop Chicken Production Companies generally do not provide slaughtering services to other Malaysian chicken production companies who do not have shareholding in their companies. Based on the Ipsos Report, out of the said 10 licenced slaughterhouses in Singapore, only three accept orders for slaughtering services from third parties like our Group. Given its high food safety and hygiene standard, Soonly Food is the only one among these three slaughtering service providers that is certified by the Agri-Food & Veterinary Authority of Singapore as a grade A slaughtering service provider. In light of the aforesaid, during the Track Record Period and up to the Latest Practicable Date, we solely relied on Soonly Food to provide slaughtering services to us in Singapore. Besides, we also relied on Soonly Food to provide with us an area in the Slaughterhouse for processing procedures carried out by our staff. For FY2016, FY2017 and the six months ended 30 September 2017, our slaughtering fees paid to Soonly Food accounted for approximately 4.8%, 5.3% and 3.1% of our total cost of sales (before biological assets adjustment), respectively. For details of our contract terms with Soonly Food, please refer to the paragraph headed Business Key contract terms with the service provider who operates the Licenced Slaughterhouse in Singapore in this document. As a result of the said reliance, our Directors are of the view that Soonly Food has a high bargaining power when dealing with our Group, particularly when most of our Kampung chickens are exported to Singapore with a small proportion remaining for domestic consumption in Malaysia. We may accept its slaughtering services at a price higher than we originally anticipated in the future and this could adversely affect the profitability of our business. Further, if Soonly Food increases its slaughtering fees to a level unacceptable to our Group or refuses to renew its contract with us in the future, we may not be able to source an alternative slaughtering service provider of the same grading without delay. Any such delay may hamper our ability to deliver our chicken meat products to our customers on time, thereby damaging our business reputation and adversely affecting our operations and financial results. Singapore Poultry Hub, jointly held by our executive Director and Chairman of the Board Dato Tan and four other companies, has made an application to the JTC Corporation, a Singaporean state-owned real estate company for a lease in a complex building developed by it for establishing a slaughterhouse in Singapore. If the said application is successful, our Group will be able to engage Singapore Poultry Hub as an alternative slaughtering service provider. However, we cannot assure you that the application of Singapore Poultry Hub will be successful. For further details on Singapore Poultry Hub, please refer to the section headed Relationship with our Controlling Shareholders A company owned by a Controlling Shareholder which was not included in our Group. 29

38 RISK FACTORS Our operations may be subject to transfer pricing adjustments by competent authorities During the Track Record Period, we reared Kampung chickens through Aqina Farming and delivered the same to the Licenced Slaughterhouse in Singapore through Boong Farming. Most of our Singapore purchase orders for live Kampung chickens and Kampung chicken meat products are concluded by Boong Poultry, one of our operating subsidiaries in Singapore. Upon receipt of the purchase orders for live Kampung chickens and/or Kampung chicken meat products from our customers in Singapore, Boong Poultry would place corresponding purchase orders with Boong Farming, who would then place corresponding purchase orders with Aqina Farming and collect Kampung chickens from the breeding farms managed and run by Aqina Farming. Although our Group had not been subject to any enquiry, audit or investigation by any tax authority in Malaysia or Singapore with respect to transfer pricing arrangements, carried out by our Groups, there is no assurance that the tax authorities would not subsequently challenge the appropriateness of our Group s transfer pricing arrangements or that the relevant regulations or standards governing such arrangements will not be subject to future changes. If a competent tax authority later finds the transfer prices and the terms applied inappropriate, such an authority may require our Group to re-assess the transfer prices and re-allocate the income or adjust the taxable income. Any such reallocation or adjustment could result in a higher overall tax liability for our Group and may adversely affect the business, financial condition and results of operation of our Group. For further details, please refer to the section headed Business Intra-Group transactions between Aqina Farming, Boong Farming and Boong Poultry. We source and purchase a part of live broilers from Contract Farmers who supply exclusively to us For FY2016, FY2017 and the six months ended 30 September 2017, live broilers sourced and purchased from our Contract Farmers accounted for approximately 26.0%, 25.3% and 17.4% of our total purchases of procuring broilers, respectively. As at the Latest Practicable Date, we contracted with 11 Contract Farms, which agreed to rear broilers in breeding farms managed and run by them and sell broilers of harvest-stage to us exclusively and in return, we agree to prepay the DOCs and chicken feeds for these Contract Farmers. Such prepayment is settled by our Contract Farmers at the end of each breeding cycle when we purchase harvested broilers from them. There is no assurance that we will be able to engage sufficient number of Contract Farmers to supply live broilers to us in the future. If there are other chicken production companies willing to offer more favourable terms than those offered by our Group to our Contract Farmers, our Contract Farmers may refuse to continue the contractual arrangements with our Group, in which case it may affect our cost of production and profitability. We enter into contracts with our Contract Farmers which stipulate the details of the arrangements for the supply of broilers of harvest-stage to us. There is no assurance that our Contract Farmers will strictly comply with our requirements and provide live broilers which meet our requirements. There is also no assurance that our Contract Farmers will continue to honour their obligations under the 30

39 RISK FACTORS contracts. Any of the above scenarios may have a negative impact on the supply of our live broilers and may adversely affect our business. Our Directors have confirmed that, during the Track Record Period, to the best of their knowledge and belief, none of the Contract Farmers had been found to be in material breach or violation of the contracts entered into with our Group. We currently do not own some of the land of the breeding farms for Kampung chickens, and we may not be able to renew our leases As at 31 March 2016, 31 March 2017 and 30 September 2017, we managed and run 12, 11 and 11 breeding farms respectively for Kampung chickens and of which four were MyGAP-certified and as at the Latest Practicable Date, we manage and run 10 breeding farms in Malaysia out of which, three were MyGAP-certified meaning that Kampung chickens reared in these farms can be exported to Singapore. For further details, please refer to the section headed Business Properties of this document. If we cannot renew the leases in respect of the Kampung chicken breeding farms managed and run by our Group, we will have to relocate our breeding farms for Kampung chickens to a new area and carry out all preparatory works and apply for all requisite licences again including but not limited to the MyGAP certificate and the poultry breeding licence, which will cause material disruption to our business operations. There is no assurance that we will successfully renew the leases in respect of the breeding farms for Kampung chickens on commercially acceptable terms, or at all. Furthermore, there is no assurance that these leases will not be terminated by the respective landlords before their expiration. Termination of our leases may occur beyond our control, such as breaches of agreements by the landlord(s) or invalidation of the leases due to the landlords lack of title to lease the properties. If it happens, we will need to relocate our breeding farms to other areas and incur additional costs due to relocation. Based on our past relationship with the landlord of our breeding farms for Kampung chickens, our Directors are confident that most of the landlords will continue to renew the respective leases with us upon expiration. In the unlikely event that the respective leases in respect of our breeding farms for Kampung chickens are not renewed, our Group will have to relocate our breeding farms, which will inevitably cause disruption to our business and operation. We are required to obtain various licences and permits to operate our business, the loss of our failure to renew any or all of these licences and permits could materially and adversely affect our business In accordance with the applicable Malaysian and Singaporean laws and regulations, we are required to maintain various licences and permits in order to operate our business, including without limitation, the Halal Certificate granted by Department of Islamic Development Malaysia, the licence to import broilers and licence to import meat and fish products both granted by the Agri-Food & Veterinary Authority of Singapore. Some of our licences such as the poultry breeding licences are subject to annual renewal. We are also required to comply with applicable hygiene and food safety 31

40 RISK FACTORS standards promulgated by the Malaysian and Singaporean government in relation to our production process. Any loss or failure to renew our licences and permits could result in temporary or permanent suspension of our operations, which could disrupt our operations and adversely affect our business. For further details, please refer to the section headed Business Licences, permits and approvals. During the Track Record Period, our Halal Certificate in Singapore had been suspended on 1 September 2017 due to a failure to meet the halal certification conditions. We have subsequently engaged a halal consultant to assist, advise and train our staff towards achieving the Halal Certificate in Singapore. We then submitted an application for the Halal Certificate on 5 January 2018 but the result of our application was yet to be known as at the Latest Practicable Date and we cannot assure you that our application would be successful. There is no assurance that the Malaysian and Singaporean governments will not change the existing laws or regulations or impose additional or more requirements, compliance with which may cause us to incur extra costs and expenses, which we may not be able to pass on to our customers by increasing the prices of our live chickens or chicken meat products, which might result in a material adverse effect on our performance. Further, we cannot guarantee that we will always be able to comply with all existing or future laws or regulations or be able to renew our permits. Failure of which may subject us to penalties and liabilities or even suspension of our operations and business, and may thereby result in a material adverse effect on our business, financial condition and performances. Changes in consumers preference, consumer spending patterns and general economic conditions could cause sales to decline Our customers are mainly wholesalers, retailers, food and beverage chains and others. These customers may place purchase orders with us depending on end-consumers demands and the prevailing market condition. As such, our sales could be affected by a number of factors beyond our control, including, among other things, changes in end-consumers spending level and preferences, general economic conditions and discretionary spending priorities, which affect the demand for our products. The end consumers spending level and preference are affected by an array of general factors, such as interest rates, level of disposable income, political uncertainty, taxation, unemployment level and general consumer confidence. Any unfavourable changes to these factors may result in lower consumer spending and end consumers may prefer other cheaper meat products to chicken meat, adversely affect the chicken production industry and result in uncertainty to the market demand for our products. Negative consumer sentiment is often noted during economic downturn. As such, our sales may decline during future economic downturns and affect our operating results, profits, business or financial condition. Our Group relies on the use of machineries, equipment and cold-room facilities to slaughter, process and store broilers and Kampung chickens and any break-down of such machineries, equipment and cold-room facilities will disrupt our operation The slaughtering and processing of broilers and Kampung chickens require the use of a wide range of machineries, equipment and cold-room facilities such as refrigeration and freezer system, compact graders, water chiller machine. Accordingly, the number of chickens that can be slaughtered, processed and stored by our Group at any given time, is limited by the availability of our resources such as the number of and functionalities of our machineries, equipment and cold-room facilities to 32

41 RISK FACTORS carry out the production process. On the other hand, if there are any unexpected breakdowns of our machineries, equipment and cold-room facilities during the production process, we may face difficulties in sourcing replacements or repairing in time. Our work progress may have to be delayed, whereby we may have to compensate our customers according to the terms of the contract between our customers and us. On the other hand, if there are any failures or breakdowns of our machineries, equipment and cold-room facilities due to any inferior or insufficient repair and maintenance works, our operation and business may be adversely affected. We may not be able to obtain adequate financing for the development of our business in the future The daily operation of our business requires intensive working capital and we also require capital investment to purchase machineries, equipment, motor vehicles and cold-room facilities for our business growth. During the Track Record Period, we relied on our registered capital, cash generated from operations, finance lease arrangement and bank borrowings to maintain our cash flow and satisfy the needs of our daily productions. We cannot assure you that we will be able to obtain bank loans and/or other equity or debt financing on commercially reasonable terms and/or on a timely basis following the [REDACTED]. If we are unable to obtain necessary financing or obtain such financing on favourable terms due to various factors beyond our control, we may not have sufficient funds to develop our business and the future prospect and growth potentials of our Group may be adversely affected. We are exposed to the credit risk from increasing balance of trade receivables Our balance of trade receivables was increasing during the Track Record Period. As at 31 March 2016, 31 March 2017 and 30 September 2017, our balance of trade receivables amounted to approximately RM13.0 million, RM16.2 million and RM 19.2 million, respectively. Given such increase in the balance of the trade receivables, we are increasingly susceptible to the credit risks in the event our customers are unable to make their payments to us when they fall due. Our liquidity has therefore become more dependent on our customers making prompt payments for our products sold. There is no assurance that our customers will make prompt settlements in a timely manner in the future or at all, which may have an adverse effect on our future liquidity position as well as financial position and results of operation. Thus, if we fail to maintain sufficient working capital through operation, collection of account receivables in time and/or to secure bank loans or financing, we may not have sufficient working capital for our daily operations, pay off our debts when they fall due and by that time, the operations, performance and prospects of our Group as well as our ability to implement our business plans may be adversely affected. 33

42 RISK FACTORS Our expansion plan may not be successful For FY2016, FY2017 and the six months ended 30 September 2017, the utilisation rate of our Slaughtering Plant in Malaysia were approximately 44.2%, 54.4% and 81.3%, respectively. Our Directors consider that it is imperative for us to establish a new processing plant in order to align our expected business growth as the current processing area of approximately 285m 2 with its ancillary cold-room facilities of approximately 329m 2 within our Slaughtering Plant in Malaysia is too small to accommodate our enlarged business in the future. Therefore, it is our strategic plan to acquire a parcel of land for expanding our halal-certified processing plant and cold-room facilities in Malaysia, acquire additional units of machineries, equipment and cold-room facilities, and recruit additional workers in order to meet the increasing demand for our chicken meat products in the Malaysian and Singaporean market and to capture future growth opportunities. The success of our expansion plan hinges on our ability to capture additional customer demands. However, there is no assurance that we will be able to maintain or establish relationships with our existing or prospective customers or secure new orders to utilise our increased production capacity. There are also other uncertainties and risks, such as delays, cost overrun, shortage of labour and shortage of key materials, which are beyond our control and would increase the cost of implementing our expansion plan. We may even have problems of under-utilisation if demand for our products does not increase at the same rate. In the event that the above-mentioned uncertainties and risks happen or we are unable to achieve a high utilisation of our production capacity as planned, there could be a material adverse effect on our performance and results of operation. On the other hand, the future capital expenditure of our Group for the purchase of machineries, equipment and cold-room facilities may result in an increase in our depreciation expenses. Our Group currently plans to use approximately by RM[REDACTED] (equivalent to approximately HK$[REDACTED]) to purchase additional machineries, equipment and cold-room facilities in order to expand our production capacity. For more details, please see the section headed Future Plans and Use of Proceeds of this document. Such additional machineries, equipment and cold-room facilities may increase our depreciation expenses, and may therefore adversely affect our Group s future results of operations and financial expense performance. Upon completion of our expansion plan, the expected increase in depreciation in respect of the upgrade and purchase of machineries, equipment and cold-room facilities would be approximately RM[160,000] per annum. Furthermore, any unexpected requirement for the acquisition of additional machineries, equipment or cold-room facilities would have a negative impact on the cash level of our Group and the additional depreciation expenses may adversely affect our Group s financial performance in the future. We may have difficulties in employing workers The Minimum Wage Policy implemented in Malaysia with effect from 1 January 2013 continues to exert pressure on the cost of employing workers. The minimum wage is a provision in the National Wages Consultative Council Act The minimum wage for private sector employees has been set at RM1,000 per month or RM4.81 per hour for employees in West Malaysia. This policy is likely to increase the cost of operations for market players, like our Group, in the local chicken production industry. This supply condition is expected to impact the market negatively in the future. 34

43 RISK FACTORS Though we have not experienced any significant shortage in production workers in the past, there is no assurance that we will not experience any shortage in production workers for our production or that the costs of employing workers in Malaysia will not continue to increase in the future. Furthermore, if the cost of employing workers continues to increase in Malaysia, our production costs may eventually increase and we may not be able to shift these extra costs to our customers due to competitive pricing pressures from our competitors. If we fail to retain our existing workers and/or recruit sufficient workers in a timely manner, we may not be able to accommodate any increase in demand for our live chickens and products or smoothly implement our expansion plans. Hence, our business operations and financial conditions would be materially and adversely affected. Our insurance coverage may not be adequate to cover all the risks During the Track Record Period, we maintained insurance coverage including property insurance, equipment damage insurance, and employee related insurance. For further details, please see the section headed Business Insurance in this document. However, there are certain types of losses for which insurance coverage is not generally available on commercial terms acceptable to us, or at all. Examples of these include insurance against losses suffered due to business interruptions, earthquakes, flooding or other natural disasters, wars, terrorist attacks or civil disorders, or losses or damages caused by industrial actions. If we suffer any losses, damages or liabilities in the course of our business operations arising from events for which we do not have any or adequate insurance covers, we may have to bear such losses, damages or liabilities by ourselves. In such case, our business operations and financial results may be adversely affected. Even if we have maintained relevant insurance policies, our insurers may not fully compensate us for all potential losses, damages or liabilities regarding our properties or business operations. We also cannot guarantee that the insurance premiums payable by us in relation to the implementation of projects will not increase. During the Track Record Period, our total insurance premiums amounted to approximately RM368,000, RM176,000 and RM120,000, respectively. Any further increases in insurance costs (such as an increase in insurance premiums) or reductions in insurance coverage may materially and adversely affect our business operations and financial results. We rely on key management personnel Our success and growth is, to a large extent, attributable to the continued commitment of our executive Directors, senior management team and our capability to identify, hire and retain suitable and qualified employees, including management personnel with the necessary industry expertise. Notwithstanding our efforts to reward them for their service and contribution to our Group, there is no assurance that our compensation packages and incentive schemes will successfully attract and retain key personnel. Any unanticipated departure of our executive Directors and/or senior management team may have an adverse impact on our business operations and profitability. 35

44 RISK FACTORS RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE Outbreak of animal diseases could adversely affect our business An occurrence of animal diseases such as avian influenza, a bird-adapted strain of H5N1 ( bird flu ), a type of disease which spreads through poultry and is capable of killing thousands of poultry and may, in some occasions, be transmitted to humans, causing symptoms such as fever, cough, sore throat, muscle aches, may cause material disruptions to our business operations. During the Track Record Period, part of the Kampung chickens sold by us were reared in breeding farms managed and run by our Group. We also procure DOCs from our DOC suppliers and live broilers from our Contract Farmers and live broilers suppliers. In the event that there is any animal disease in the breeding farms managed and run by our Group, production facilities of our DOC suppliers, Contract Farmers and/or our live broiler suppliers, the supply of our DOCs and live broilers may be interrupted, which will in turn affect our business operations. Further, Malaysian companies intending to export their chicken meat products to Singapore must be approved by the Agri-Food & Veterinary Authority and pass the inspection conducted by the relevant Singaporean authorities. An outbreak of animal disease in Malaysia will often lead to an import suspension from the Singaporean government. During the Track Record Period, there was an outbreak of animal diseases in Malaysia such as H5N1 in March 2017 in Kelantan, a northeast state in Malaysia whereby poultry products from that area were suspended from import by Singaporean government. Although a number of poultries were destroyed during the outbreak of H5N1 in March 2017, the Department of Veterinary Services Malaysia agreed to compensate the affected farmers, hence the effect to local economy was minimal. During the Track Record Period, breeding farms managed and run by our Group did not encounter any outbreak of animal disease. However, there is no assurance that there will be no recurrence of any outbreak of animal diseases in Malaysia which may affect our business operation. Further, there is no assurance that the Malaysian government will compensate the affected farmers or companies. Outbreaks of avian influenza or any other similar epidemic can materially affect the confidence and interest of the consumers about our live chickens and chicken meat products, which will in turn directly affect the sales of our live chickens and chicken meat products and disrupt our production activities. We may be required to suspend our business operations temporarily during the outbreak of the avian influenza or animal diseases. Our Group or our suppliers may be required to exterminate large quantities of live chickens if any of our live chickens are suspected to be carrying avian influenza or other animal diseases. Further, since usually over thousands of chicken are reared in each farmhouse where cross infection between chickens may easily occur, in the event that any one chicken in a farmhouse is found to have been infected, we may have to exterminate all the chickens in the same farmhouse or even the farm, which will in turn cause significant loss to our Group. Personal injuries, property damages or fatal accidents may occur at work sites We use machineries, equipment and cold-room facilities in our slaughtering processes such as cutting equipment which are potentially dangerous and may cause industrial accidents and personal injuries to our employees. Although we generally supervise and monitor closely our employees in the implementation of all safety measures and procedures during the slaughtering and processing 36

45 RISK FACTORS operations, we cannot guarantee that our employees will follow our safety instructions and/or will not breach any applicable rules, laws or regulations. Any personal injuries and/or fatal accidents to the employees of our Group may lead to claims or other legal proceedings against our Group. As at the Latest Practicable Date, our Group was not subject to any claims from employees. We operate in a competitive and consolidated environment According to the Ipsos Report, the chicken production industry has undergone a transformation over the last decade with the growing dominance of large-scale operators with full or partial vertical integration. There has been considerable concentrated growth with increasing mergers and acquisitions of small-scale operators by large-scale integrated operators, which illustrates the gradually unfolding market consolidation process in this competitive industry, wherein large players enjoy advantages in margin control and economies of scale. Our ability to compete also depends on a number of factors which may be beyond our control, including the price of our raw materials, the price of live chickens and comparable products offered by our competitors in the market and our responsiveness to changes in our customers needs. In the event that our competitors lower their product prices, we might have to follow their act in order to maintain our market shares and competitiveness. There is no assurance that our attempts to remain competitive in the market will succeed. Increased competition may also lead to price wars, counterfeit products or negative brand advertising, all of which may adversely affect our market share, the price of our live chickens products and profit margin. Should we lose our competitiveness against our existing competitors or new market entrants in any of the abovementioned aspects, there will be an adverse effect on the results of our operations. If our attempts to remain competitive fail and our market share shrinks, our overall performance may also be adversely affected. RISKS RELATING TO CONDUCTING BUSINESS IN MALAYSIA AND SINGAPORE As most of our Group s assets, business operations and facilities are in Malaysia and Singapore, their economic, political and legal developments would affect the results of our operations, financial position and prospects accordingly. The major risks that we are exposed to are as follows: Our business operations are subject to uncertainties with respect to the laws and regulations, social, political and economic developments, and Malaysian and Singaporean government policies Our Group s business, prospects, financial condition and results of operations may be adversely affected by any changes in the laws and regulations, social, political and economic developments and changes in Malaysian and Singaporean government policies. All our products are sold in Malaysia and Singapore, which will continue in the foreseeable future. Our operations will be subject to the risks of regional conflicts, terrorism, extremism, nationalism, changes in interest rates, imposition of capital controls, changes in government policies or introduction of new rules or regulations concerning chicken production industry in Malaysia as well as the consumer market for chicken consumption in both Malaysia and Singapore and methods 37

46 RISK FACTORS of taxation in Malaysia and Singapore. Any negative developments in the Malaysian and/or Singaporean economy may have a material adverse effect on business. Although the overall Malaysian and Singaporean economic environment (in which our Group predominantly operates) appears to be positive, there can be no assurance that this will continue to prevail in the future. Furthermore, we are required to comply with the laws and regulations on environmental protection in Malaysia. We produce certain amount of sewage or solid waste in our production process and we are subject to the restrictions of the laws and regulations on environmental protection in Malaysia on the discharge of the aforesaid waste materials. We are required to install waste treatment facilities to deal with such waste substances. Malaysian government may tighten regulations governing our industry to meet more stringent environmental requirements. It may expand the scope of existing regulations, tighten the rules governing the licence renewal process or even impose requirements to install certain equipment; these new measures may limit our Group s flexibility to operate and may increase our Group s costs of operations. Our Group s failure to comply with such laws and regulations could also result in reprimands, penalties, fines and legal proceedings against us. Currency conversion and exchange rate risks Since a substantial amount of income and profit of our Group is denominated in RM and SGD, any fluctuations in the value of RM and SGD may adversely affect the amount of dividends, if any, payable to the Shares in HK$ to our Shareholders. The Central Bank of Malaysia had, in the past, intervened in the foreign exchange market to stabilise the RM, and it pegged the RM to the US$ in September On 21 July 2005, the Central Bank of Malaysia adopted a managed float system which benchmarked the RM to a currency market to ensure that the RM remains close to its fair value. Our Group cannot assure you that the Malaysian government will not impose more restrictive or additional foreign exchange controls. Any imposition, variation or removal of exchange controls may lead to less independence in the Malaysian government s conduct of its domestic monetary policy and increased exposure of the Malaysian economy to the potential risks and vulnerability of external developments in the international markets. On the other hand, SGD is managed against a basket of currencies of its major trading patterns and competitors such as China and United States. The composition of the basket of currencies is reviewed periodically to take into account changes in Singapore s trade pattern. For instance, SGD has been depreciated against US$ from 2012 to 2016 partly due to an expectation for stronger US$ triggered by the interest rate hike and partly affected by the weak export of Singapore. Furthermore, fluctuations in the RM s value against other currencies will create foreign currency translation gains or losses and may have an adverse effect on our Group s business, financial condition and results of operations. Any imposition, variation or removal of foreign exchange controls may adversely affect the value, translated or converted into HK$, of our Group s net assets, earnings or any declared dividends. Consequently, this may adversely affect our Group s ability to pay dividends or satisfy other foreign exchange requirements. 38

47 RISK FACTORS Our ability to receive dividends and other payments from our subsidiaries in Malaysia may be restricted Although there are no restrictions on foreign exchange transaction in Singapore, there are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies are administered according to the Foreign Exchange Administration Rules as promulgated by the Central Bank of Malaysia. The foreign exchange policies apply to both residents and non-residents. Under the current Foreign Exchange Administration Rules issued by the Central Bank of Malaysia, non-residents are free, at any time, to repatriate any amount of investment proceeds, including capital, divestment proceeds, profits, dividends, or any income arising from investments in Malaysia, subject to the applicable reporting requirements and any withholding tax, provided that repatriation of funds must be made in a foreign currency. If the Central Bank of Malaysia introduces any new foreign exchange policies which restrict such proceeds from being repatriated in the future, the ability to repatriate dividends or distributions to our Company could adversely affect our business, results of operations and financial condition. Our Group s principal subsidiaries are incorporated in Malaysia and Singapore and their main assets are located in Malaysia and Singapore. It could be difficult to enforce a foreign judgement against our Malaysian and Singaporean subsidiaries, our Directors and the management in Malaysia Our Group s principal subsidiaries are incorporated under the laws of Malaysia or laws of Singapore. The majority of our Directors and members of management are residents of Malaysia and a substantial portion of the assets of our subsidiaries and the assets of our Directors and management are located in Malaysia and Singapore. In Singapore, enforcement of foreign judgements generally does not pose much difficulty. However, enforceability of certain foreign judgement in Malaysia is by virtue of the Reciprocal Enforcement of Judgements Act 1958, in which a foreign judgement must be registered before it can be enforceable. The registration of such foreign judgements is only possible if the judgement is given by a superior court from a country listed in the First Schedule of the Reciprocal Enforcement of Judgement Act 1958, which includes United Kingdom, Hong Kong, Singapore, New Zealand, Republic of Sri Lanka, India and Brunei Darussalam. In two of Judgement Act 1958, the only method of enforcement at common law, is by securing a Malaysian judgement. As a result, it could be difficult to enforce a foreign judgement against our Malaysian subsidiaries, our Directors and the management in Malaysia. Trade ban or import control During Track Record Period, our Group sold broilers and Kampung chickens to Singapore for wholesaling and retailing. In the event that Singapore bans on trade with the Malaysia or impose higher import restriction or hygiene standard in relation to imported food products, our Group s business and results of operation may be adversely affected. Our Directors confirmed that during the Track Record Period, our Group has not experienced any trade ban or import control on its exports. 39

48 RISK FACTORS RISKS RELATING TO THE [REDACTED] AND OUR SHARES The market price and trading volume of our Shares may be highly volatile Prior to the [REDACTED], there has been no public market for our Shares, and there is no assurance that an active trading market for our Shares will develop or be sustained upon completion of the [REDACTED]. The market price and trading volume of our Shares may be highly volatile. Factors such as variations in our Group s revenue, earnings or cash flow and/or announcements of new investments, strategic alliances could cause the market price of our Shares to change substantially. Any such factors may result in large and sudden changes in the volume and market price at which our Shares will be trading. There are no assurances that these developments will or will not occur in the future and it is difficult to quantify the impact on our Group and on the trading volume and market price of our Shares. In addition, our Shares may be subject to changes in the market price, which may not be directly related to our financial or business performance. Shareholders equity interests may be diluted Our Group may need to raise additional funds in the future to finance, inter alia, expansion or new developments relating to its existing operations or new acquisitions. If additional funds are raised through the issue of new equity and equity-linked securities of our Company other than on a pro-rata basis to the existing Shareholders, the percentage ownership of the Shareholders in our Company may be reduced and Shareholders may experience dilution in their percentage shareholdings in our Company. In addition, any such new securities may have preferred rights, options or pre-emptive rights that make them more valuable than or senior to the Shares. Investors of the Shares may experience dilution in the net asset value per Share of the Shares they invested if our Company issues additional Shares in the future at a price which is lower than the net asset value per Share. Future sale of Shares by existing Shareholders could materially and adversely affect the prevailing market price of our Shares The Shares beneficially owned by the existing Shareholders are subject to certain lock-up periods. There are no assurances that any Controlling Shareholders will not dispose of our Shares held by them following the expiration of the lock-up periods, on any Shares they may come to own in the future. Our Group cannot predict the effect, if any, of any future sales of our Shares by any Controlling Shareholder on the market price of our Shares. Sale of a substantial amount of Shares by any of them or the issue of a substantial amount of new Shares, or the market perception that such sale or issue may occur, could materially and adversely affect the prevailing market price of our Shares. There has been no prior public market for our Shares and an active trading market for our Shares may not develop Prior to the [REDACTED], there has been no public market for our Shares. The [REDACTED] will be determined through negotiations between us and the [REDACTED] (for themselves and on behalf of the Underwriters), and it may not necessarily be indicative of the market price of the Shares 40

49 RISK FACTORS after the [REDACTED] is complete. While we have applied for the [REDACTED] of and permission to deal in the [REDACTED] on GEM, we cannot assure you that an active trading market will develop, or, if it does develop, that it will be sustained following completion of the [REDACTED], or that the market price of the Shares will not fall below the [REDACTED]. RISKS RELATING TO STATEMENTS MADE IN THIS DOCUMENT Statistics and industry information may come from various sources which may not be reliable Certain facts, statistics and data presented in the section headed Industry Overview of this document and elsewhere in this document in relation to the chicken production industry in Malaysia and Singapore have derived, in part, from various publications and industry-related sources prepared by government departments or Independent Third Parties. We believe that the sources of the information are appropriate sources for such information and we have no reason to believe that such information is false or misleading or that any fact that would render such information false or misleading has been omitted. Neither our Group, our Directors, the Sole Sponsor, the [REDACTED] and the [REDACTED] nor any of the parties involved in the [REDACTED] have independently verified, or make any representation as to, the accuracy of such information and statistics, as such these statistics and data should not be unduly relied upon. Investors should read this entire document carefully and we strongly caution you not to place any reliance on any information (if any) contained in press articles or other media regarding us and the [REDACTED] including, in particular, any financial projections, valuations or other forward looking statements. There may be press or other media, which contains certain information referring to us and the [REDACTED] that is not set out in this document prior to the publication of this document. We wish to emphasise to potential investors that neither we nor any of the Sole Sponsor, the [REDACTED], the [REDACTED] and the Underwriters, the Directors, officers, employees, advisers, agents or representatives of any of them, or any other parties (collectively, the Professional Parties ) involved in the [REDACTED] have authorised the disclosure of such information in any press or media, and neither the press reports, any future press reports nor any repetition, elaboration or derivative work was prepared by, sourced from, or authorised by us or any of the Professional Parties. Neither we nor any Professional Parties accept any responsibilities for any such press or media coverage or the accuracy or completeness of any such information. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication. To the extent that any such information is not contained in this document or is inconsistent or conflicts with the information contained in this document, we disclaim any responsibilities and liabilities whatsoever in connection therewith or resulting therefrom. Accordingly, prospective investors should not rely on any such information in making your decision as to whether to subscribe the [REDACTED]. You should rely only on the information contained in this document. 41

50 WAIVER FROM STRICT COMPLIANCE WITH THE GEM LISTING RULES In preparation for the [REDACTED], our Company has sought the following waiver from strict compliance with the relevant provisions of the GEM Listing Rules. CONTINUING CONNECTED TRANSACTIONS Our Group has entered into certain transactions with connected persons that are expected to continue after the [REDACTED], which will constitute continuing connected transactions of our Company under the GEM Listing Rules upon the [REDACTED]. We have applied to the Stock Exchange for, [and the Stock Exchange has agreed to grant, a waiver] from strict compliance with the requirements under Chapter 20 of the GEM Listing Rules for certain continuing connected transactions. For further details of such continuing connected transactions and waiver, please refer to the section headed Connected Transactions in this document. 42

51 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED] [REDACTED] 43

52 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED] [REDACTED] 44

53 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED] [REDACTED] 45

54 INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED] [REDACTED] 46

55 DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] DIRECTORS Name Address Nationality Executive Directors Dato Tan Chin Long No. 40, Jalan Padi Huma 1 Bandar Baru Uda Tampoi Johor Bahru Johor, Malaysia Datin Teo Siew Giok No. 40, Jalan Padi Huma 1 Bandar Baru Uda Tampoi Johor Bahru Johor, Malaysia Mr. Wong Chin Chuan 150, Jalan Perak 10 Taman Bersatu Kulaijaya Johor, Malaysia Mr. Wesley Tan Seah Ging No. 40, Jalan Padi Huma 1 Bandar Baru Uda Tampoi Johor Bahru Johor, Malaysia Malaysian Malaysian Malaysian Malaysian Independent non-executive Director Ms. Lim Joo Seng 8 Jalan BK 6B/11 Bandar Kinrara Puchong Malaysia Malaysian Mr. Mak Shiu Chung, Godfrey ( ) Mr. Tam Ching Ho ( ) Flat C, 7 Floor, Breezy Court 2A Park Road Hong Kong Room 8, 31 Floor, Block B Kornhill, Quarry Bay Hong Kong Chinese Chinese For further information on the profile and background of our Directors, please refer to the section headed Directors, Senior Management and Employees of this document. 47

56 DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] PARTIES INVOLVED IN THE [REDACTED] Sole Sponsor [REDACTED] and [REDACTED] Legal advisers to our Company RHB Capital Hong Kong Limited 12/F, World-Wide House 19 Des Voeux Road Central Hong Kong (A corporation licenced under the SFO and permitted to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities) [REDACTED] As to Hong Kong Law TC & Co. Units , 22/F., Tai Tung Building 8 Fleming Road, Wanchai, Hong Kong As to Malaysian Law David Lai & Tan Level 8-3 & 8-4, Wisma Miramas No. 1, Jalan 2/109E Taman Desa Jalan Klang Lama Kuala Lumpur Wilayah Persekutuan As to Singaporean Law Valensea Law LLC 10 Anson Road International Plaza #20-01 Singapore As to Cayman Islands Law Appleby Jardine House 1 Connaught Place Central, Hong Kong 48

57 DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] Tax adviser to our Company Legal advisers to the Sole Sponsor and the [REDACTED] Auditors and reporting accountants RSM Tax Advisory (Hong Kong) Limited 29th Floor, Lee Garden Two 28 Yun Ping Road Causeway Bay Hong Kong As to Hong Kong Law Hastings & Co. 5th Floor, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong Mazars CPA Limited Certified Public Accountants, Hong Kong 42nd Floor, Central Plaza 18 Harbour Road, Wanchai, Hong Kong Mazars LLP Public Accountants and Chartered Accountants of Singapore 135 Cecil Street #10-01 MYP Plaza Singapore Receiving Bank Industry consultant Biological Asset Valuer [REDACTED] Ipsos Limited 22/F, Leighton Centre 77 Leighton Road Causeway Bay Hong Kong Jones Lang LaSalle Corporate Appraisal and Advisory Limited 6/F Three Pacific Place 1 Queen s Road East Hong Kong 49

58 CORPORATE INFORMATION Headquarters and principal place of business in Malaysia Principal place of business in Hong Kong under Part 16 of the Companies Ordinance Registered office in the Cayman Islands Company s website address Company Secretary Authorised representative (for the purpose of the GEM Listing Rules) Compliance Officer Audit Committee Remuneration Committee Nomination Committee No.3, Jalan Usaha 2 Lorong Usaha Utama Taman Perindustrian Ulu Choh Pekan Nanas, Pontian Johor, Malaysia Unit B, 13/F, Winsan Tower 98 Thomson Road Wan Chai Hong Kong P.O. Box 1350 Clifton House 75 Fort Street Grand Cayman KY Cayman Islands (information on this website does not form part of this document) Mr. Chan Hon Wah HKICPA 1119, Chin Hing House Hing Wah Estate Chai Wan Hong Kong Dato Tan Chin Long Mr. Chan Hon Wah Mr. Wong Chin Chuan 150, Jalan Perak 10 Taman Bersatu Kulaijaya Johor, Malaysia Mr. Tam Ching Ho (Chairman) Ms. Lim Joo Seng Mr. Mak Shiu Chung, Godfrey Mr. Mak Shiu Chung, Godfrey (Chairman) Mr. Wong Chin Chuan Ms. Lim Joo Seng Ms. Lim Joo Seng (Chairman) Dato Tan Chin Long Mr. Mak Shiu Chung, Godfrey 50

59 CORPORATE INFORMATION Cayman Islands principal share registrar and transfer office Hong Kong branch share registrar and transfer office Principal bankers [REDACTED] P.O. Box 1350 Clifton House 75 Fort Street Grand Cayman KY Cayman Islands [REDACTED] Level 22 Hopewell Centre 183 Queen s Road East Hong Kong Malaysia Maybank Malayan Banking Berhad level 14, Menara Maybank 100 Jalan Tun Perak Kuala Lumpur, Malaysia United Oversea Bank Level 2, Menara UOB Jalan Raja Laut Kuala Lumpur, Malaysia Hong Leong Bank Berhad Level 1, Menara Hong Leong No. 6 Jalan Damanlela, Bukit Damansara Kuala Lumpur, Malaysia Singapore DBS Singapore 12 Marina Boulevard Level 3 MBFC Tower 3 Singapore OCBC Singapore 65 Chulia Street #01-00 OCBC Centre Singapore Compliance adviser Zhongtai International Capital Limited 19/F Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong 51

60 INDUSTRY OVERVIEW The information presented in this section, unless otherwise indicated, is derived from various official government publications and other publications and from the Ipsos Report prepared by Ipsos, an independent market research agency, which was commissioned by us. We believe that the sources of such information and statistics are appropriate and have taken reasonable care in extracting and reproducing such information and statistics. Our Directors have no reason to believe that such information or statistics is false or misleading in any material respect of that any fact has been omitted that would render such information or statistics false or misleading in any material respect. The information and statistics have not been independently verified by us, the Sponsor, the [REDACTED], the [REDACTED], the Underwriter, our or their respective directors and officers or any other parties involved in the [REDACTED]. No representation is given as to the accuracy or completeness of such information and statistics. SOURCE OF INFORMATION We have commissioned Ipsos to conduct an analysis of, and to report on, the chicken production industry in Malaysia and Singapore at a fee of HK$558,000, and our Directors consider that such fee reflects market rates and the payment of which was not contingent upon the [REDACTED] or on the result of the report. The Ipsos Report has been prepared by Ipsos independent of our Group s influence. Except as otherwise noted, the information and statistics set forth in this section have been extracted from the Ipsos Report. Ipsos has been engaged in a number of market assessment projects in connection with initial [REDACTED] in Hong Kong. Ipsos is part of a group of companies which employs approximately 16,000 personnel worldwide across 87 countries. Ipsos conducts research on market profiles, market sizes and market shares and performs segmentation analysis, distribution and value analysis, competitor tracking and corporate intelligence. The Ipsos Report includes information on the chicken production industry in Malaysia and Singapore. The information contained in the Ipsos Report is derived by means of data and intelligence gathering which include: (i) desktop research; and (ii) primary research, including interviews with key stakeholders, competitors, industry experts and associations in Hong Kong, etc. Information gathered by Ipsos has been analysed, assessed and validated using Ipsos in-house analysis models and techniques. According to Ipsos, this methodology guarantees a full circle and multilevel information sourcing process, where information gathered can be cross-referenced to ensure accuracy. All statistics are based on information available as at the date of the Ipsos Report. Other sources of information, including government, trade associations or marketplace participants, may have provided some of the information on which the analysis or data is based. ASSUMPTIONS AND PARAMETERS USED IN THE IPSOS REPORT Analyses in the Ipsos Report are based on the following assumptions: (i) the supply and demand of the chicken production industry in Malaysia and Singapore are assumed to remained stable during the forecast period; and (ii) the external environment is assumed to have no turmoil, such as financial crises, natural disasters and animal diseases, that will influence the demand and supply of chicken production industry in Malaysia and Singapore during the forecast period. The following parameters have been taken into account in the market sizing and forecast model in the Ipsos Report: GDP and GDP growth rate in Malaysia and Singapore from 2012 to 2016 and forecast from 2017 to 2021; Total population growth in Malaysia and Singapore from 2012 to 2016 and forecast from 2017 to 2021; GNI per capita and GNI per capita growth rate in Malaysia and Singapore from 2012 to 2016; Consumption on poultry and consumption growth rate in Malaysia and Singapore from 2012 to 2016; Exchange rate of the Malaysian dollars against the Hong Kong dollars and Singapore dollars from 2012 to 2016; Exchange rate of the Singapore dollars against the Hong Kong dollars from 2012 to 2016; Total volume of domestic chicken consumption in Malaysia and Singapore from 2012 to 2016; Comparison of consumption volume of chicken and other major livestock products in Malaysia and Singapore from 2012 to 2016; Total retail sales value of chicken in Malaysia and Singapore from 2012 to 2016; Comparison of retail sales value between chicken and other livestock products in Malaysia and Singapore from 2012 to 2016; Gross output value of chicken production industry in Malaysia from 2012 to 2016; Total volume of domestic chicken production in Malaysia from 2012 to 2016; Average wholesale prices of broiler and Kampung chicken in Malaysia from 2012 to 2016; Total export value of chicken from Malaysia from 2012 to 2016; Average export price of chicken from Malaysia from 2012 to 2015; 52

61 INDUSTRY OVERVIEW Top 5 export countries of chicken from Malaysia by value in 2016; Total number of chicken farming companies in Malaysia in 2016; Average wages of workers in the chicken production industry in Malaysia in 2010 and 2015; Price trend of key raw materials relevant to the chicken production industry in Malaysia from 2012 to 2016; Total volume of chicken processed in Singapore from 2012 to 2016; Top 5 export countries of poultry to Singapore by value in 2016; Average retail price of chicken meat product in Singapore from 2012 to 2016 and Average import price of chicken in Singapore from 2012 to OVERVIEW OF CHICKEN CONSUMPTION AND PRODUCTION INDUSTRY IN MALAYSIA Chicken consumption in Malaysia The graph below sets forth the total volume of domestic chicken consumption in Malaysia from 2012 to 2016 and forecast from 2017 to 2021: Total volume of domestic chicken consumption Million kg , , , , , , , , , ,774.4 CAGR CAGR ( ) (2017F-2021F) 5.6% 2.1% F 2018F 2019F 2020F 2021F Note: F denotes forecast figures. Source: The Ipsos Report From 2012 to 2016, the total volume of domestic chicken consumption grew from 1,258.3 million kg to 1,563.9 million kg, at a CAGR of 5.6%. Malaysian populace has strong preference toward chicken over other meat types which is largely attributed to the high affordability and availability of chicken products as well as the minimal religious restriction against chicken consumption among major religions in Malaysia. The official religion in Malaysia is Islam, more than 60% of all Malaysians are practicing Islam and for those people pork consumption is strictly forbidden; Buddhists, who do not consume beef are the second largest population in Malaysia, accounting for approximately 20% of the total population. Chicken can be consumed regardless of religious beliefs. As such, the demand for chicken meat is high. In 2016, beef and pork continued to be priced significantly higher than chicken due to a greater production cost, at a retail price of RM29.1 per kg and RM19.2 per kg respectively, compared to chicken at RM9.2 per kg. The preference for chicken, contributed to the competitive price range, has therefore, remained strong in Malaysia. From 2017 to 2021, the total volume of domestic chicken consumption in Malaysia is expected to grow gently at a CAGR of 2.1% from 1,631.2 million kg in 2017 to 1,774.4 million kg in Chicken production in Malaysia Value chain and product categories Chicken production industry consists of six major stages including the feed mills, grandparent and parent stock farming, chicken farming, chicken processing, distribution and retailing. The chicken production industry in Malaysia has evolved over the last decade to accommodate modern forms of 53

62 INDUSTRY OVERVIEW commercial practices. A key feature of the value chain is the presence of businesses that own and operate feed mills, grandparent and parent farms, broiler farms, processing and sales facilities. Such businesses are referred to as full integrators. Feed mills Chicken distribution to overseas Overseas chicken retailing Grandparent and parent stock farming Chicken farming Chicken processing Local chicken distribution Local chicken retailing Commercial bred broiler and Kampung chicken are two major chicken types produced for local and international consumption. Due to their designated nature for commercial consumption, broilers and Kampung chickens are raised in housing facilities until they reach an appropriate weight for slaughtering. In general, broilers are ready for processing while reaching the weight from 2.0 kg to 2.4 kg, whereas approximately 1.4 kg for Kampung chickens. Laying and breeding chickens are not designed for commercial consumption, but fundamentally reproduction and egg laying purposes. Hence, broilers account for more than 85% of the total chicken production for commercial consumption, with the rest being Kampung chickens, laying and breeding chickens, which combined account for less than 15%. According to the Department of Veterinary Services Malaysia ( DVS ), the feed conversion rate of broiler chickens and Kampung chickens in Malaysia ranges from 1.6 to 1.8 and 2.5 to 3.0, in general, respectively. Production statistics The graph below sets forth the total production volume and gross output value of the broiler and Kampung chicken in Malaysia from 2012 to 2016 and forecast from 2017 to 2021: Total production volume of broiler and Kampung chicken Gross output value of broiler and Kampung chicken production Million kg 2, , , , ,981.8 Kampung 1, , , , , , , ,210.31,248.5 Broiler CAGR ( F) 12.3% CAGR ( ) 6.5% CAGR (2017F-2021F) 7.2% CAGR (2017F-2021F) 4.9% RM million 20, , , , CAGR ,637.9 Kampung ( F) 15, % , , , , , ,777.7 CAGR 8,552.1 Broiler ( ) 7, % CAGR (2017F-2021F) 10.8% CAGR (2017F-2021F) 8.6% F 2018F 2019F 2020F 2021F Broiler Kampung Chicken F 2018F 2019F 2020F 2021F Broiler Kampung Chicken Note: (1) F denotes forecast figures. (2) The total production volume and gross output value of Kampung chicken in 2016 is a forecast figure due to data unavailability from the DVS. Source: The Ipsos Report From 2012 to 2016, the total production volume of broiler grew from 1,210.3 million kg to 1,555.4 million kg, at a CAGR of 6.5%. From 2012 to 2016, the total production volume of Kampung chicken grew from 24.3 million kg to 38.6 million kg, at a CAGR of 12.3%. The increased chicken production was driven by an enhanced production capacity in Malaysia. Between 2012 to 2016, production activities were expanding amid an increased land capacity along rising number of broiler farms in Malaysia. To facilitate the production efficiency and quality in Malaysia, the government also introduced National Agro-food Policy ( ) to encourage advanced production practices such as the use of biotechnology and closed housing system. Such factors have facilitated the augmented production volume of chicken in Malaysia. The gross output value of chicken production industry grew correspondingly with the total production volume from 2012 to Amid the supportive policy, the increase in gross output value was also a result of rising demand for chicken. Growing chicken demand in both local and export markets were observed attributing to the population growth in such destinations. Population has direct impact on the demand of staple food such as chicken in Malaysia. From 2012 to 2016, the population in Malaysia grew from 29.5 million to 31.7 million, at a CAGR of 1.8%. Whereas Singapore, as a major export destination of chicken in Malaysia, also grew from 5.3 million to 5.6 million, at a CAGR of 1.4%. Population growth has fundamentally led to a higher demand for chicken, and therefore, 54

63 INDUSTRY OVERVIEW contributed to the rising statistics of the industry in Malaysia. Together with the accelerating wholesale price of chicken products led by general price inflation and wage increment of workers, the gross output value of chicken production industry in Malaysia grew more steeply than the production volume in previous years. Driven by the continuous support of the Malaysian government, together with an expected population growth and rising chicken prices, which combined will likely drive up the gross output value of chicken production industry in Malaysia from 2017 to A gentle increment of production volume is also expected in the near future amid growing population and enhanced production technology. Pricing statistics From 2012 to 2016, the average wholesale price of broiler and Kampung chicken increased steadily from RM6.4 per kg and RM10.3 per kg to RM7.2 per kg and RM10.8 per kg, at a CAGR of 3.2% and 1.1% respectively, while retail price of chicken products increased from RM8.4 per kg to RM9.2 per kg, at a CAGR of 8.6%. Kampung chicken is generally priced higher due to more space required for farming as well as a longer production lead time as compared with broiler chicken. Overall, such price increase of chicken products was mainly a result of wage increment of workers in the chicken production industry initiated by the government s introduction of minimum wage in OVERVIEW OF CHICKEN CONSUMPTION AND PRODUCTION INDUSTRY IN SINGAPORE Chicken consumption and chicken production in Singapore The graph below sets forth the total volume of domestic chicken consumption in Singapore from 2012 to 2016 and forecast from 2017 to 2021 and the total volume of chicken processed in Singapore from 2012 to 2016: Total volume of domestic chicken consumption Total volume of chicken processed Million kg F 2018F 2019F 2020F 2021F CAGR CAGR ( ) (2017F-2021F) 2.9% 1.2% Million kg CAGR ( ) 1.4% Note: F denotes forecast figures. Source: The Ipsos Report From 2012 to 2016, the total volume of domestic chicken consumption grew from million kg to million kg, at a CAGR of 2.9%. The total consumption volume surged in 2016 with a yearly growth of approximately 10.8%. The hike was a result of consumption downturn of fish, one that was deemed as a protein substitute of chicken in Singapore. Despite the surge in 2016, the total volume fluctuated in previous years. This could be attributed to the additional caution of general public paid towards chicken consumption caused by the outbreak of the avian influenza (H7N9) in Overall, the increase in chicken consumption from 2012 to 2016 was in accordance with the country s population growth. Alongside an established multi-food culture and growing tourism, which combined has facilitated the intake of chicken from 2012 to 2016 in Singapore. From 2017 and onwards, the total chicken consumption in Singapore is expected to have a gentle growth from million kg in 2017 to million kg in 2021, at a CAGR of 1.2%. During the course of 2012 to 2016, the total volume of chicken processed in Singapore increased from 69.1 million kg to 73.2 million kg, at a CAGR of approximately 1.4%. In 2016, Malaysia remained as the key live chicken supplier to Singapore due to the geographical proximity of the two countries. Kampung chicken and broiler were the two major chicken types for import. In December 2017, there were 135 Malaysian farms accredited by the Agri-Food & Veterinary Authority of Singapore (AVA) to import live chickens to Singapore. Amid a rising chicken consumption driven by the population growth and high awareness to healthy living, import of live chicken for processing was growing accordingly. Many Singaporeans are aware of the benefits of white meat intake such as fish and chicken, versus red meat such as pork and beef. 55

64 INDUSTRY OVERVIEW Pricing statistics Chicken is a cheap option of meat as compared to pork and beef. Such price difference secured the demand for chicken products in Singapore, in addition to the country s inflation, the average retail price of chicken products witnessed an increase from SGD5.9 (equivalent to RM17.6) per kg in 2012 to SGD6.4 (equivalent to RM19.1) per kg in 2016, at a CAGR of 2.0%. Note: Due to the minimal upstream activities of chicken production in Singapore, the government does not track the wholesale price of chicken products on a yearly basis. COMPETITIVE LANDSCAPE IN MALAYSIA As of 2016, there were approximately 645 players involved in chicken production activities in Malaysia, including raising, breeding, farming, distribution and sales of chicken. The Group accounted for approximately 0.8% of the total gross output value of the chicken production industry in Malaysia as of The chicken production industry has undergone a transformation over the last decade to becoming more consolidated amid the growing dominance of large scale operators with full or partial vertical integration. In light of the growing competition in the industry, vertical integration has become an increasingly popular coordinating mechanism along the industry supply chain, this has coincided with the prevalence of contract arrangements. Having said that, it is not an uncommon practice nowadays for large to medium scale operators to expand their businesses vertically through mergers and acquisitions of small scale operators and individual farms. In addition to mergers and acquisitions, some operators may enter into contractual arrangements with Contract Farmers to guarantee sufficient supply of quality chickens. Such integration activities or contractual arrangements illustrate the gradually unfolding market consolidation process in this competitive industry, wherein large to medium scale operators enjoy advantages in margin control and economies of scale. In view of the following constraints identified based on the publicly available information and research, it is not feasible to identify the top five players in the chicken production industry in Malaysia because (i) fully and partially integrated players undertake multiple production processes along the value chain as to what extent and order varies among players. Having considered different process coverage of key players in the industry, it is difficult to identify the top players by process, such as chicken farming, processing and distribution of which the Company mainly involves in; and (ii) public information pertaining to players total revenue and revenue in relation to chicken farming, processing and distribution are not made publicly available as most of the players in the industry are private companies. Having considered the above, table below sets forth the profiles of key players, who are fully integrated operators in Malaysia in 2016: Company Name Company A Company B Company C Headquarter Penang, Malaysia Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia Establishment year Background Information 2002 The company is a listed fully integrated chicken production company with operations mainly conducted in West Malaysia with chicken farming production activities including feed mill production, hatchery, rearing, slaughtering and distribution. The production capacity of the company is claimed to be approximately 110,000 birds per day The company engages in feed mill production, breeding, hatchery and broiler farming. The company is a supplier of chicken for various chained restaurants in Malaysia. The annual production capacity of the company is claimed to be approximately 32 to 36 million birds The company is a listed fully integrated chicken production company who engaged in feed mill production, breeding of parent stocks, slaughtering, processing and distribution. The company owns two parent stock breeder farms and nine broiler farms which are mainly located in Sabah. Monthly production capacity of broiler farms is claimed to be over 2.5 million birds. 56

65 INDUSTRY OVERVIEW Company Name Headquarter year Background Information Establishment Company D Kuala 1979 The company is a private fully integrated Lumpur, chicken production company engaged in feed Malaysia mill production, grandparent stock, breeder, broiler and eggs, and distribution. Company E Company F Source: The Ipsos Report Melaka, Malaysia Bukit Minyak, Malaysia 1994 The company is a private fully integrated chicken production company engaged in feed mill production, grandparent stock, hatchery, broiler, processing and distribution The company is a listed fully integrated chicken production company which engaged in broiler, breeder and layer farming together with feed mill production. The company operates and manages 40 broiler farms in the states of Penang, Kedah and Perak. The monthly production volume is claimed to be approximately 4.1 million kg of broiler, mainly selling to the northern and central West Malaysia. Key factors of competition An established reputation and all-rounded relationship with upstream and downstream businesses: The level of competition across the value chain has accelerated by increasingly concentrated upstream and downstream markets due to vertical integration formally achieved by business mergers and acquisitions. Amid the growing competition among players, established relationships between peers along the value chain is considered a vital factor in securing business survival and, more importantly, major sources of input and sales channels. Integrated product offerings: The chicken production industry in Malaysia has evolved to accommodate modern forms of commercial practices. Vertical integration streamlines the industry competition, securing the market position and business portfolio of the operators boasting full or partial integration. Being vertically integrated could assist the business in controlling production costs, as well as reducing operational risks by offering greater product diversity. Given the increasingly dynamic and concentrated landscape of the industry, integrating and adapting to modern forms of practice is rapidly becoming a key factor in operator competition. Stiff pricing competition among peers: Competition in the chicken production industry is stiff in many ways, with price being one of the factors that will set each competitor apart. Pricing information is transparent and accessible among chicken farmers. As such, players are price sensitive and ought to be prudent with price setting to ensure the level of competitiveness in the industry. Key market drivers and opportunities Supportive government policy: To maintain the sustainability and competitiveness of the chicken production industry, the Malaysian government has proposed a 10-year National Agro-food Policy covering the years 2011 to Several strategies focusing on the acceleration of chicken productivity have been put forth, one of which is the adoption of modern farming technique of harnessing effective microorganisms as natural control agents and the provision of probiotic-laced feed to build up immunity against infection; good farming practices like closed house farming system are also encouraged. The aforementioned government program promotes sustainable development in the chicken production industry which will increase the chicken production volume to fulfil the demand for both local and overseas export. Increasing population and no religious restriction on chicken consumption: The Malaysia population has increased at a consistent and stable rate, with the majority of the Malaysian population being either Muslim or Buddhist, both groups have to abide by religious diets and are prohibited from consuming pork and beef, respectively. Among all the alternative meat types for the two largest religious groups in Malaysia, chicken is more price competitive and offers a stable supply. Therefore, chicken has become the most commonly consumed meat that fits consumption across different dietary needs. Mergers and acquisitions: Integration activities are commonly executed in attempt to reinforce players positioning in the industry. Such consolidation could improve production efficiency and reduces production costs. Large scale operators, particularly to those with ownership of feed mills, could better control their costs and profit margin. To do so, these operators will monitor the adverse 57

66 INDUSTRY OVERVIEW impact of volatility of exchange rate on feed price as well as the supply and demand in the world market on feed cost by performing hedging. In light of the potential benefits of a successful merger and/or acquisition, it is considered an opportunity for industry players to enhance their positioning and level of competitiveness in the chicken production industry in Malaysia. Key threats Volatile production costs: The fluctuation of production costs could impact the profit margin of industry players, mainly due to the volatility of feed costs which account for more than 70% of the production costs. Feed costs have historically been correlated with the prices of its key feed raw ingredients - corn and soybean. In Malaysia, these commodities are imported from the world market and settled by USD, and thus the price is susceptible to foreign exchange volatility. In addition, increasing global energy demand on biofuel as an alternative will lead to the volatility of chicken feed. Soybean oil and corn grain are two major feedstocks for biodiesel production. The demand for soybean and corn as a biofuel feedstock will make its availability as chicken feed scarce in the market, which further affects the cost of chicken production. Feed conversion ratio has been used as a profitability parameter for chicken producers in Malaysia. The volatility of feed costs will lead to higher production costs and have an adverse impact on chicken production margins. Outbreaks of diseases: Outbreaks of diseases such as bird flu, has an adverse impact on the productivity and revenue of the industry. Although Malaysian government has made an effort to minimize the risk of outbreaks, there is no guarantee that the emergence of a new strain of a virus will not have a significant impact on the health of chickens and the overall production of the chicken production industry. For example, during the outbreak of H5N1 in Kelantan of Malaysia in March 2017, 56,953 poultry and 17,531 eggs were destroyed. Nevertheless, the total chicken and duck population of Kelantan only accounts for less than 1% of Malaysia s population. The DVS has also agreed to pay RM413,004 to 1,034 affected farmers. Other than this, no serious damages were inflicted on the local economy. Entry barriers Growing dominance of large scale integrators: Amid the streamlining competition in the chicken production industry, the survival and development of new entrants and small scale players may face limitation in terms of capital for investment in modern technology and difficulties in assuring chicken product quality whereas large scale integrators may have sufficient funds and capital to invest in high-tech farming which helps boost production capacity and reduce production cost. Therefore, increasing trend of consolidation and slow growth in contract farming are observed in the chicken production industry, which could mean a barrier to the survival of new entrants and some existing industry players, particularly those with small scale operation and limited capital. High initial and operating capital requirement: Companies entering the chicken production industry are required to fulfil a minimum start-up capital of RM520,000. This requirement may pose a challenge to new entrants whom with limited financial capability. Financial burden for such small scale players are not limited to initial capital requirement, but also an increasing production cost e.g. labour costs due to the rise of minimum wage. A wealth condition could, therefore, be an entry barrier to new entrants. COMPETITIVE LANDSCAPE IN SINGAPORE The chicken production activities remained low in Singapore as of 2016 due to land scarcity. Upstream production including raising, breeding and farming activities are minimal in Singapore. Most of the production are along the downstream of supply chain, including processing, distribution and sales of chicken. In 2016, the Group accounted for approximately 5.8% of the total volume of chicken processed in Singapore. In Singapore, 34% of the total imported chicken products was live chicken, whereas 66% of them were processed and packaged outside the country prior to import in As of 2016, Malaysia remained as the only supplier of live chicken to Singapore, whereas other chicken products including chilled, frozen and dressed chicken products were mainly sourced from Brazil, the US, Argentina and Denmark. From 2012 to 2016, the number of slaughtering facilities remained at 10, all were owned by or in partnership with a total of 22 live chicken suppliers in Malaysia. Such Malaysian chicken suppliers together own 135 chicken farms in West Malaysia that are approved by the AVA to export live chickens for processing. Some of these Malaysian live chicken suppliers own distribution channels in Singapore. 58

67 INDUSTRY OVERVIEW According to Ipsos, it is not feasible to identify the top five players in the chicken production industry in Singapore because public information pertaining to players total revenue and revenue in relation to chicken farming, processing and distribution are not made publicly available as most of the players in the industry are private companies. Having considered the above, the table below sets forth the profiles of key players involving in live chicken supply in 2016: Company Name Headquarter year Background Information Establishment Company A Kuala 1979 The company is engaged in processing and Lumpur, Malaysia distribution of chicken meat in Singapore. As of September 2017, they own 28 approved chicken farms in Malaysia and three chicken slaughtering houses in Singapore. The processed chickens are distributed by their two subsidiaries in Singapore. Company B Company C Company D Company E Source: The Ipsos Report Defu Lane 2, Singapore Penang, Malaysia Sri Sulong, Malaysia Johor, Malaysia 1987 The company processes and distributes fresh chickens in Singapore. The company relies mainly on the supply of live chickens from its sister company who based in Malaysia with 14 approved chicken farms and other independent approved chicken farms in Malaysia The company specialise in processing and distribution of chicken meat in Singapore. Live chickens are imported from the company s self-owned 15 approved chicken farms in Malaysia, processed and distributed by the two subsidiaries in Singapore The company engages in the processing and distribution of chicken meat in Singapore. Live chickens are imported from 13 approved chicken farms in Malaysia and slaughtered and distributed by its subsidiary in Singapore The company distributes Kampung chicken under its own name mainly to restaurants. Live chickens are imported from six approved chicken farms in Malaysia held by the company and processed by a third-party slaughtering house in Singapore. Key factors of competition Well-established relationships with overseas chicken suppliers: Given the country s strong reliance on overseas supply of chicken products, having well-established long-term relationships with overseas suppliers is becoming a key factor of competition to ensure a sufficient and timely supply of quality chicken products for local consumption. Securing the timely supply of quality products could positively affect the level of downstream customer satisfaction in Singapore, which may lead to successful recurring business opportunities. Efficient logistics arrangement: The logistics of chicken is a vital factor of competition that sets a company apart from its competitors. Additional care is required for the transportation of live animal. Chickens being in an overly crowded environment will suffocate to death. Proper vaccination, temperature control, and sanitary level during transportation could help secure a healthy condition of chickens importing from Malaysia to Singapore. Perishable food including chicken meat are likely to spoil, decay or become unsafe to consume if not kept refrigerated at an appropriate temperature. In light of the significant daily demand of chicken meat to households and restaurants in Singapore, a timely logistics of good quality chicken products is a key factor of competition amongst players. Competitive pricing: Applicable to towns and cities across the country, chicken is a staple food consumed by a large portion of Singapore s population. The price fluctuation of chicken could impact many downstream businesses along the value chain, and end up as a burden to end customers. Considering a low switching cost for end customers to other indirect protein substitutes such as fish and soy products, the price fluctuation may lead to a switch in demand from chicken to other substitutes in the market. The sensitivity of end customers to chicken prices is considered a factor of competition for businesses looking to develop a competitive pricing strategy that could sustain their market position in the industry. 59

68 INDUSTRY OVERVIEW Market drivers and opportunities Rising demand from food and beverage providers amid continuing population and tourism growth: The demand for food is driven primarily by the population growth. Chicken consumption has increased alongside the population growth which has risen from 5.32 million in 2012 to 5.61 million in 2016, at a CAGR of 1.4%. During the same period, international tourists travelling to Singapore increased from 14.5 million to 16.4 million, at a CAGR of 3.1%. In light of the growing population and tourism, the total number of food and beverage providers accumulated to 7,679 in 2016 from 6,672 in 2012, at a CAGR of 3.6%. Chicken is served prevalently among both households and restaurants. Such growth in population, tourism and restaurants indicate a promising demand of chicken products in Singapore. Increasing health awareness of Singaporeans: The Singapore government has been actively promoting healthy living and the benefits of a balanced diet. The Health Promotion Board was established in 2001 to organise health programs in communities, workplaces and schools. As a result, Singaporeans are educated to be more aware of their nutritional intake. According to the Annual Report published by the AVA, chicken was the most popular meat type with the highest consumption per capita in 2016 which was 35 kg, followed by pork which was 20 kg. As chicken is considered white meat which contains less fat and fewer calories than red meats such as pork and beef, chicken is perceived as a healthier meat choice. With an increasingly health-aware general public and continuous demand for chicken as a healthier meat choice, the consumption growth of chicken is expected to maintain in the near future. Key threats Limited number of chicken supply partners poses threat to Singapore s ability to counter risks of unpredictable disruptions to supply of chicken: Singapore imports chickens from limited number of countries, namely Brazil, Malaysia and the United States. Chickens from these three countries accounted for approximately 96% market share of Singapore s imported chicken industry. Singapore also imported chickens from other countries such as Denmark, Argentina and Thailand but at a very low import volume. If any of the three major countries above incur issues that reduce the number of chickens exported, they will directly affect Singapore s domestic chicken supply. For example, the large-scale bird flu outbreak in Malaysia in 2004 directly caused Singapore to incur a shortage of chicken supply. Outbreaks of diseases in major chicken exporting countries may affect the chicken supply in Singapore: Avian flu is contagious and can spread easily among birds, especially when a great number of broilers for meat consumption are kept in close proximity to each other. Such farming and rearing conditions may make it easier for diseases and viruses to spread among chickens. As a result, outbreaks of disease often lead to a shortage of chicken supply. For example, in March 2017, the AVA suspended the imports of poultry, poultry products, processed eggs and live birds from regions in the states of Tennessee and Wisconsin in the United States, after the area had been affected by avian flu. Fluctuating foreign exchange is likely to raise the cost of chicken importing industry: Singapore relies primarily on chicken import. As a result, foreign exchange rates between SGD and major trading partners came as an important factor that affects the chicken prices and domestic chicken consumption in Singapore. For example, the United States is the third largest chicken importing country to Singapore. The exchange rate of each USD to SGD increased constantly throughout 2012 to 2016 from to Such appreciation of USD is expected to continue as the United States shows continuous economic recovery leading to an interest rate hike. For Singapore, it means more expensive US products and Singapore might consider shifting towards other countries, which can cost time and money. From this perspective, fluctuating foreign exchange is likely to pose a threat to the country s chicken importing industry. Entry barriers Legal requirements set by the Singaporean government: The chicken production industry, imported live chicken processing segment in particular, is highly regulated by Singaporean and Malaysian governments. New entrants need to import live chickens from the 135 chicken farms in West Malaysia approved by the Singaporean government in order to process them locally in the 10 licenced slaughtering facilities in Singapore. New entrants may need to overcome the barrier of an unestablished relationship with both Malaysian live chicken suppliers and Singaporean processors, of which would be challenging to their survival among existing players. Consolidated industry structure: In Singapore, established imported chicken production companies enjoy the advantages of economies of scale with ownership and/or established relationship with local peers and overseas live chicken suppliers. Within this highly consolidated segment, existing players compete yet cooperate with one another to ensure their business survival against new entrants. In March 2016, seven holding companies who supply more than 90% of the live chickens to Singapore 60

69 INDUSTRY OVERVIEW were accused of distorting the prices of live chickens by the Competition Commission of Singapore. Such cooperation indicates a strong connection among existing peers, which also highlights the potential barrier new entrants confront in being able to compete with established players with great economies of scale. RAW MATERIALS AND LABOUR IN MALAYSIA Monthly average wage From 2010 to 2015, the total number of workers engaged in the raising, breeding and production of chicken grew from 9,870 to 19,078 including full time and part time workers. According to the Department of Statistics Malaysia, the average monthly wage of such workers was approximately RM1,300 in 2010, and increased to RM1,900 in 2015, at a CAGR of 7.9%. The wage increases from 2010 to 2015 was attributed to the implementation of minimum wage that was commenced in 2013 by Malaysia Minimum Wage Consultative Council MMWCC. According to the Federation of Livestock Farmers of Malaysia, workers of the FLFAM members were paid as low as RM600 per month prior to the introduction of minimum wage. With such implementation, the monthly minimum wage was increased to RM900. Monthly wage is expected to accelerate along with the adjustment of minimum wage. In 2017, the MMWCC reviewed the Minimum Wages Order 2016 and announced to adjust the minimum wage in West Malaysia from RM900 per month to RM1,000 per month, which is expected to commence in Note: This wage survey was conducted in every five years by the Department of Statistics, Malaysia. As the previous two surveys being conducted in 2010 and 2015, the next survey is expected to be conducted in 2020 and released in Raw materials - Feed The graph below sets forth the average price of major feeds including corn, soybean and wheat in Malaysia from 2012 to 2016: Average price of major feeds Source: RM 1, , , , , , , The Ipsos Report 1, , , , , Corn Soybean Wheat Soybean Corn Wheat CAGR ( ) Feeds as a leading source of production cost in the industry is an important indicator of the chicken prices in Malaysia. According to the DVS, the farming cost structure comprises of day-old chicks, chicken feeds, vaccination, labour, utility and transport. Among all costs, chicken feed alone accounts for approximately 70% of the total production cost. In 2016, approximately 90% of the chicken feed were sourced overseas from Brazil, Argentina and India. Corn and soybean meal were the two key components of chicken feed, which contributed to approximately 65% and 20% of the total feed cost respectively. Wheat serves as an alternative to corn and soybean meal, particularly when these feeds are short in supply or priced exorbitantly by overseas suppliers. The chicken feeds prices including corn, soybean and wheat encountered an overall decline from 2012 to 2016, at negative CAGRs of 8.0%, 0.2% and 8.7%. Corn price plummeted from 2012 and reached the lowest in 2014 at RM631.3 per metric ton, which was attributed to the surging production volume of supplier countries. For example, Russia s corn production volume had a 40% yearly growth in As such, the corn price declined in accordance with the overproduction of corn in the global market. For the other years, the supply of corn was highly sufficient to maintain a competitive corn price for Malaysian feed mills operators. Meanwhile, wheat supply in the global market was, as well, sufficient to keep the price competitive in the course of 2012 to Similar to the other two raw materials, soybean meal experienced a general decline, particularly the price drop in 2015 was a result of RM depreciation. In 2015, RM depreciated substantially against the USD due to the fall in global Brent crude oil price. -0.2% -8.0% -8.7% 61

70 REGULATORY OVERVIEW OVERVIEW During the Track Record Period and up to the Latest Practicable Date, our Group has business operations in Malaysia and Singapore. We believe that the law and regulations that may be applicable can be classified into the following categories: 1 business operation; 2 employment; and 3 hygiene and environment. Set out below is a summary of salient Malaysian and Singaporean legal and regulatory frameworks that may be applicable in our business operations are as follows: MALAYSIAN LAWS 1. Business Operation (a) The Local Government Act 1976 and Trade By-Laws It is a requirement for a company carrying out business in Malaysia to obtain a business license for each operating premise from the relevant local authority which is empowered under the Local Government Act 1976 ( LGA 1976 ). LGA 1976 confers the power to the local authority to make by-laws which provide that no person shall use any premise within the jurisdiction of respective Municipal Council without a license issued by respective Municipal Council. The validity of a business license shall be valid for a period not exceeding three years and subject to renewal. It is provided under LGA 1976 that any person who fails to exhibit his license at all times in some prominent place on the licenced premises or to produce such license when required shall be liable to a fine not exceeding RM500 or to imprisonment for a term not exceeding six months or to both. Our Group is running its businesses at District of Pontian, State of Johor, Malaysia and therefore it is a requirement to comply with Licensing of Trades, Businesses, Industries and Professions (Pontian District Council) By-Laws 1981 ( By-Law ). Pursuant to this By-Law, no place within the area of Pontian District Council shall, unless licenced by the President, be used for any trade, business, industry or profession for which fees have been prescribed in the schedule. Any person who without a license establishes or uses any premises for any of the purposes set out in the schedules of this By-Law shall be guilty of an offence and shall be liable on conviction to a fine not exceeding RM2,000 or to a term of imprisonment not exceeding one year or to both such fine and imprisonment and to a further fine not exceeding RM200 for every day during which the offence is continued after conviction. 62

71 REGULATORY OVERVIEW (b) The Industrial Co-ordination Act 1975 The Industrial Co-ordination Act 1975 ( ICA 1975 ) requires any person(s) engaging in any manufacturing activity with shareholders funds of RM2,500,000 and above or employing 75 or more full time paid employees to obtain a manufacturing license from Ministry of International Trade and Industry of Malaysia ( MITI ). Any person engaging in manufacturing activity below the thresholds will be exempted from the requirement to hold a manufacturing license. Under ICA 1975, a manufacturing activity includes making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade. Any person who fails to obtain the said manufacturing license shall be liable on conviction to a fine not exceeding RM2,000 or to a term of imprisonment not exceeding 6 months and to a further fine not exceeding RM1,000 for every day during which such default continues. There is no expiry for the manufacturing license, however, the licensing office may in his discretion revoke a manufacturing license if the manufacturer: (i) has not complied with any condition imposed in the license; (ii) is no longer engaged in the manufacturing activity in respect of which the license is issued; or (iii) has made a false statement in his application for the license. (c) The Sale of Goods Act 1957 The applicable requirements of the Sale of Goods Act 1957, ( SOGA 1957 ) are: (i) the formation of a contract for sale which takes place when there is a transfer in the property of the goods for a price; (ii) the conditions and warranties that govern the contract of sale such as stipulations as to time, conditions and warranties, implied undertakings as to title and as to quality or fitness are met with, in the carrying out of the business. In particular, quality of the product shall not be compromised, neither shall the fitness for the purpose of the trade; and (iii) the performance of the contract is complied with wherein the sale is carried out with the seller complying with its duties and that delivery of the product is in line with the SOGA (d) Price Control And Anti-Profiteering Act 2011 The Price Control and Anti Profiteering Act ( PCAPA 2011 ) provides that the price controller appointed under the act (the Price Control ) may, with the approval of the Minister of Domestic Trade, Co-operatives and Consumerism, determine the maximum, minimum or fixed price for the manufacturing, producing, wholesaling or retailing of any goods, any particular classes of goods or any unit or quantity of goods. It is an offence under section 11 of PCPA 2011 for any person to sell or offer to sell any price-controlled goods otherwise than in accordance with the prices determined by the price controller. Section 18 of PCPA 2011 provides that any person who commits any offence shall, on conviction be liable to a fine not exceeding RM5,000 and for subsequent offence, to a fine not exceeding RM1,000,

72 REGULATORY OVERVIEW Festive Seasons Price Control Scheme The Festive Season Price Controlled Scheme ( FSPCS ) was implemented by the Ministry of Domestic Trade, Co-operatives and Consumerism since year 2000 under the PCAPA Under FSPCS, a number of essential festive season goods are identified as price-controlled goods wherein their maximum selling price will be determined according to areas and districts for a specified period. FSPCS is enforced at the producer, wholesaler and retailer level. (e) The Control of Supplies (Chicken) Regulations 1996 According to the Control of Supplies (Chicken) Regulations 1996 ( CSCR 1996 ), any person who deal with the breeding, wholesale or retail of chicken shall have a license. If a person has more than one place of business, he shall take out a separate license in respect of each place of business. The application for the issuance of license shall be made to the Controller of Supplies or supplies officers in writing. A license issued or renewed under the CSCR 1996 shall remain in force for a period of five years from the date of issue or renewal. Every licensee shall display his license at a conspicuous place at his premise and shall comply with all the directions given by the Controller in the manner in which the license is to be displayed. Any body corporate who contravenes or fails to comply with any provisions in the CSCR 1996 or the terms and conditions of any license issued or renewed commits an offence. On conviction, shall be liable to a fine not exceeding RM2,000,000. (f) Animals Act 1953 The Animals Act 1953 ( AA 1953 ) is an act governing and control the movement of animals or birds into, within and from West Malaysia. Section 6 and Section 14 of the AA 1953 respectively provides that no person shall import any animal or bird or export any animal or the carcass of any animal except in accordance with a license issued under the AA 1953 and in accordance with the conditions of such license and such other conditions as may be prescribed. Any person who imports an animal or bird contrary to this provision shall on conviction, be liable to a fine of RM5,000 or to imprisonment for a term of two years or to both, whereas for any person who exports any animal or the carcass of any animal in contrary with these provisions shall on conviction, be liable to a fine of RM500 or to imprisonment for a term of six months or to both. Section 15 of the AA 1953 provides that the owner or person in charge of any animal exported to Singapore shall produce evidence in writing of the permission of the Director General of Agri-Food and Veterinary Authority of Singapore to import animals into Singapore before any license could be issued. Section 50A of AA 1953 provides that no person shall keep in captivity for sale, export or exhibition any animal or bird in any place which is not licenced in accordance with the rules made under this Act provided that this section shall not apply except in such areas as shall be prescribed by such rules. Any person who contravenes with this section shall be liable to a fine of RM200 or to imprisonment for a term of six months or to both. 64

73 REGULATORY OVERVIEW Pursuant to Section 16 of AA 1953, every animal which is about to be exported may be required to undergo an examination by a veterinary authority at such place as the authority may appoint. If any animal which is about to be exported is in the opinion of the veterinary authority infected with any disease, according to Section 17 of AA 1953, the authority may refuse to permit such animal or any contacts of the animal to be exported. (g) Control and Licensing of Poultry Farming Enactment 1997 The Control and Licensing of Poultry Farming Enactment 1997 ( CLPFE 1997 ) states that any person who operates or carries out poultry farming or poultry related activities shall have a license and each poultry farm shall have a separate license. The license shall expire on 31st day of December of each year but may be renewed for a further period of one year from the said 31st day of December. Any person who operates or carries out any poultry farming without a valid license shall be guilty of an offence and shall on conviction, be liable to a fine not exceeding RM10,000 but not less than RM5,000 or to an imprisonment not exceeding two years or both. An application for the renewal of a license shall be submitted to the licensing officer at least 3 months before the expiry date. Penalty of not exceeding RM100 shall be imposed following any application for renewal that is submitted more than three months but before expiry date of the license. If the application for a renewal is made after the expiry date, a penalty of RM500 for late application shall be imposed. A licensee shall comply with the conditions of the license, failing which, he shall be guilty of an offence and shall on conviction be liable to a fine not exceeding RM5,000 or to imprisonment for a term not exceeding 6 months or both. In the case of continuing offence, a licensee shall be charged to a daily fine of RM500 each day that the offence continues. A licensee shall display a valid license in a conspicuous place at the poultry farm in respect of which the license is issued, failing which, he shall be guilty of an offence and shall on conviction be liable to a fine not exceeding RM1,000. (h) Trade Descriptions Act 2011 The relevant provisions of halal in Malaysia is governed under the Trade Descriptions Act 2011 ( TDA 2011 ). The Department of Islamic Development Malaysia (JAKIM) and State Islamic Religious Council, are the responsible authorities in the affairs of halal in Malaysia. The main objective of TDA 2011 is to promote a good trade practice by prohibiting false trade descriptions and false or misleading statements, conducts and practices in relation to the supply of goods and services and to provide for matters connected therewith or incidental thereto. Pursuant to the Trade Descriptions (Definition of Halal) Order 2011, halal food means food that followed the requirements that has been imposed by the Islamic Laws, i.e food that neither consists of nor contains any part of an animal that is prohibited by Islamic laws or has not been slaughtered in accordance with Islamic Laws. 65

74 REGULATORY OVERVIEW The Trade Descriptions (Certification and Marking of Halal) Order 2011 ( TDO 2011 ) provides that all the foods and goods cannot be described as halal or described in any other way to show that the food or goods can be consumed by Muslims unless it is certified by the competent authority as halal or marked with the logo as specified in the first schedule of the TDO Any person who (i) applies a false trade description to any goods; (ii) supplies or offers to supply any goods to which a false trade description is applied; (iii) or exposes for supply or has in his possession, custody or control for supply any goods to which a false trade description is applied, commits an offence and shall, on conviction, be liable, if such person is a body corporate, to a fine not exceeding RM250,000, and for a second or subsequent offence, to a fine not exceeding RM500,000. (i) Food Act 1983 The Food Act 1983 ( FA 1983 ) (together with the Food Regulations 1985) was enacted to protect the public against health hazards and fraud in the preparation, sale and use of food, and for matters incidental thereto or connected therewith. The FA 1983 is applicable to all foods sold in Malaysia either locally produced or imported, covers a broad spectrum from compositional standards to food additives, nutrient supplements, contaminants, packages and containers, food labelling, procedure for taking samples, food irradiation, provision for food not specified in the regulations and penalty. Sections 13 to 17 of FA 1983 provides that any persons that prepare and sell food containing substances injurious to health, unfit for human consumption, and adulterated food commits an offence under the Act and shall be liable, upon conviction to a fine not more than RM100,000 respectively or to imprisonment for a term not more than ten years or both fine and imprisonment. In addition, the Director General of Health may, by notice in writing, order that food be recalled, removed or withdrawn from sale from any food premises. (j) Food Regulation 1985 Regulation 9 of the Food Regulations 1985 ( FR 1985 ) provides that no person shall advertise for sale or sell food contained in a package if the package does not bear all the particulars required to be contained on a label required by the regulations; or if the label contains something that is prohibited by the regulations; or if the label contains particulars that are not in the position or manner required by these regulations. Pursuant to regulation 11 of the FR 1985 every package containing food for sale shall include among others, the appropriate designation of the food containing the common name of its principal ingredients. The FR 1985 also provides that the particulars to be set out must appear conspicuously and prominently in a label on a food product. Regulation 10 provides that the statement appearing on the label shall be in the Malay language if the food is produced or packaged in Malaysia or in Malay or English language if it is imported. 66

75 REGULATORY OVERVIEW Regulation 14 of FR 1985 also provides that no person shall advertise for sale or sell the types of food listed in the schedule unless it is date marked. Date marking is defined as a date permanently marked or embossed on the package or label on the package signifying the expiry date or date of minimum durability. Expiry date is defined as the date after which the food, when kept in accordance with any storage conditions set out in the label, may not retain the quality attributes normally expected by a consumer. Date of minimum durability on the other hand means the date until which the food, when kept in accordance with any storage conditions set out in the label, will retain any specific qualities for which tacit or express claim has been made. Regulation 397 of FR 1985 provides that any person who contravenes or fails to comply with the provisions of FR 1985 commits an offence and where no penalty is provided by the Act, the offender will be liable to a fine not exceeding RM5,000 or imprisonment of a term not exceeding two years. (k) Consumer Protection Act 1999 The Consumer Protection Act 1999 ( CPA 1999 ) is an act enacted to provide greater protection for the consumer. All the products shall meet the requisite safety standards including: (i) the performance, composition, contents, manufacture, processing, design, construction, finish or packaging of the goods; (ii) the testing of the goods during or after manufacture or processing; (iii) the form and content of markings, warnings or instructions to accompany the goods. The person supplying or offering to supply the goods or services shall adopt and observe a reasonable standard of safety to be expected by a reasonable consumer, due regard being had to the nature of goods or services concerned. There is an implied guarantee that all the goods supplied are of an acceptable quality. The goods shall be deemed to be of acceptable quality if they are fit for all purposes for which goods of the type in question are commonly supplied; acceptable in appearance and finish; free from minor defects; safe and durable. Failure to comply the same will on conviction be liable, if such person is a body corporate, to a fine not exceeding RM250,000, and for a second or subsequent offence, to a fine not exceeding RM500, Employment matters (a) The Industrial Relations Act 1967 The Industrial Relations Act 1967 ( IRA 1967 ) provides the legal framework and procedures for employees who have been unfairly dismissed and/or constructively dismissed by their employers. The IRA 1967 provides an avenue to seek redress via the Malaysian industrial court, which specialises in handling industrial relation matters only. (b) The Employment Act 1955 The Employment Act 1955 ( EA 1955 ) regulates all labour relations including contracts of service, payment of wages, employment of women, maternity protection, rest days, hours of work, holidays, termination, lay-off and retirement benefits, employment of foreign employees and keeping of registers of employees. 67

76 REGULATORY OVERVIEW For the purpose of EA 1955, Employment (Amendment) Act 2012 provides that employee means any person, irrespective of his occupation, who has entered into a contract of service with an employer under which such person s wages do not exceed RM2,000 a month and employees involve in manual labour, supervisors of such manual labourers and drivers, irrespective of their monthly wages. In the event of inconsistencies between the terms of employment contract and the minimum standards of the EA 1955, the more favourable terms will be enjoyed by the employees. Every employer is required to prepare and keep the registers of employees in the prescribed form. Unless otherwise permitted by the Director General of Labour, the register of employees is required to be kept under Employment Regulations 1957 in the office within the place of employment where employees are employed and the employer shall make such register of employees available for inspection by the Director General of Labour as and when required to do so. (c) The Employment (Restriction) Act 1968 The Employment (Restriction) Act 1968 ( ERA 1968 ) provides that no person shall employ in Malaysia, a non-citizen unless there has been a valid employment permit issued. Upon obtaining the approval from the Ministry of Home Affairs, a company is required to submit applications for Visit Pass (Temporary Employment) to the Foreign Workers Division, Immigration Department of Malaysia. The approval of the Visit Pass (Temporary Employment) can be revoked if its conditions are contravened. Failure to comply will result the employer being fined not exceeding RM5,000 or to imprisonment for a term not exceeding one year or both wherein the word of employer is defined under ERA 1968 as any person who has entered into a contract of service to employ any other person as an employee includes the agent, manager or factor of such first mentioned person. (d) Workmen s Compensation Act 1952 Under Section 26(2) of the Workmen s Compensation Act 1952 ( WCA 1952 ), it is mandatory for every employer to insure all foreign workers employed by him under an approved insurance scheme in respect of any liability that he may incur. Any employer who for the purpose of defraying or partly defraying the cost of insurance in respect of his liability to pay compensation under this Act makes any deduction from the earnings of a workman in his employment shall be guilty of an offence and shall be liable on conviction to a fine not exceeding RM5,000 or to imprisonment for a term not exceeding one year or to both. Any employer who fails to insure himself in accordance with this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding RM20,000 or to imprisonment for a term not exceeding two years or to both. (e) The Employees Provident Fund Act 1991 The Employees Provident Fund ( EPF ) is a social security institution formed in accordance with the Employees Provident Fund Act 1991 ( EPFA 1991 ) providing for the retirement benefits for employees through management of their savings in an efficient and reliable manner. 68

77 REGULATORY OVERVIEW Under EPFA 1991, both the employers and employees are required to make contributions into the employee s individual account in the EPF. The employers are required to contribute EPF to employees who are Malaysian citizens or permanent residents. Expatriates and foreign workers, who are not Malaysian citizens or permanent residents are not required to contribute EPF unless they elect to do so. The amount is calculated based on the monthly wage of the employee and the contribution rate is based on the wage or salary received by the employee. If the employer fails to make the required contribution to the EPF within the prescribed period, the company and the directors are liable to pay in respect of or on behalf of any employee shall, on conviction, be liable to imprisonment for a term not exceeding three years or to a fine not exceeding RM10,000 or to both. (f) The Employees Social Security Act 1969 Social Security Organization ( SOCSO ) was mandated to administer and enforce the Employees Social Security Act 1969 ( ESSA 1969 ) and Employee Social Security General Rules 1971 ( ESSGR 1971 ). Through the ESSA 1969 and ESSGR 1971, SOCSO is able to provide free medical treatment, facility for physical or vocational rehabilitation, and financial assistance to employees if they have lost their abilities due to accidents or disease that have reduced their abilities to work or rendered them incapacitated. Before 1 June 2016, ESSA 1969 covers all employees who work under employers with a monthly salary RM3,000 or below. Pursuant to the Employees Social Security (Amendment) Act 2016, SOCSO contributions are mandatory for all employees regardless of salary. However, contributions will be capped at the monthly remuneration of RM4,000. The contribution to employee under ESSA 1969 shall comprise the contribution by the employer and employee respectively. If the employer fails to make the required contribution to SOCSO, the company and the directors shall be punishable with imprisonment for a term which may extend to two years, or with fine not exceeding RM10,000 or with both. Court may also order the employer to pay to the SOCSO the amount of any contributions, together with any interest credited on it, due and payable to SOCSO. (g) The Minimum Wages Order 2016 The Minimum Wages Order 2016 ( MWO 2016 ) imposes minimum wages on all employees. The current minimum wages of employees in West Malaysia is RM1,000 per month whereas the current minimum wages of employees in Sabah, Sarawak and Federal Territory of Labuan is RM920 per month. (h) The Occupational Safety and Health Act 1994 The Occupational Safety and Health Act 1994 ( OSHA 1994 ) provides a legislative framework to promote standards for safety and health at work. Pursuant to the provisions contained the OSHA 69

78 REGULATORY OVERVIEW 1994, the employer has a duty to ensure, so far as is practicable, the safety, health and welfare at work of the employees. It is the duty of employers to provide the employees with the training, knowledge, information and supervision to provide a safe working environment without risks to their health, safety and welfare. The safety, health and welfare of persons at work are regulated under OSHA 1994 which is under the purview of the Department of Occupational Safety and Health, Ministry of Human Resources. It is required by OSHA 1994 that every employer shall establish a safety and health committee at the place of work if (a) there are 40 or more persons employed at the place of work; or (b) the Director General of Occupational Safety and Health directs the establishment of such a committee at the place of work. The committee s main function is to review the safety and health measures and investigate any matters arising thereof. OSHA 1994 also requires an occupier of a place of work to employ a competent person to act as a safety and health officer at the place of works. The safety and health officer employed shall be exclusively for the purpose of ensuring the due observance at the place of work of the provisions of the OSHA 1994 and any regulation made thereunder and the promotion of a safe conduct of work at the place of work. Where a body corporate contravenes any provisions of the OSHA 1994 or any regulations made thereunder, every person, who at the time of the commission of the offence is a director, manager, secretary or other like officer of the body corporate shall be deemed to have contravened the provision and may be charged jointly in the same proceedings with the body corporate or severally, and every such director, manager, secretary or other like officer of the body corporate shall be deemed to be guilty of the offence. However, it is further provided under OSHA 1994, it shall be a defence in any proceeding against a person for an offence under the OSHA 1994 or any regulations made thereunder to satisfy the court that the offence was committed without his consent or connivance and that he exercised all such due diligence to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his functions in that capacity and to all the circumstances. 3. Hygiene and Environment (a) Food Hygiene Regulations 2009 Food Hygiene Regulations 2009 ( FHR 2009 ) provides that person who uses any food premises for the purpose of manufacturing food or in connection with the preparation, preservation, packaging, storage, conveyance, distribution or sale any food shall register their premises. Such person shall apply for registration of food premises to the Director of Health Services of the Ministry of Health with a fee of RM30. A certificate of registration for food premises shall be valid for a period of not exceeding three years from the date of its issuance and an application for renewal shall be made at least 30 days before the expiry of the certificate. Every certificate holder shall conspicuously display the certificate of registration of food premises in the food premises. 70

79 REGULATORY OVERVIEW According to the FHR 2009, the owner of the food premises shall provide and make available a food safety assurance programme in the food premises to ensure the food premises do fulfill all the legal requirements under FHR Any person who fails to comply with any regulations under FHR 2009 shall commit an offence and shall on conviction, be liable to a fine not exceeding RM10,000 or to imprisonment for a term exceeding 2 years. (b) Environmental Quality Act 1974 The Environmental Quality Act 1974 ( EQA 1974 ) restricts pollution of the atmosphere, noise pollution, and soil pollution, It also prohibits unlicenced discharge of oil and wastes into Malaysian waters, and prohibits open burning. The Environmental Quality (Schedule Waste) Regulations 2005 ( EQSWR 2005 ) is the relevant regulation which may apply to our Group in governing the disposal of special type of waste named in the first schedule of EQSWR Any person who place, deposit or dispose of the scheduled waste in contravene with EQA 1974 and EQSWR 2005 shall be guilty of an offence and shall be liable to a fine not exceeding RM500,000 or to imprisonment for a term not exceeding five years or both. EQA 1974 further provides that where an offence against EQA 1974 or any regulations made thereunder has been committed by a company, firm, society or other body of persons, any person who at the time of the commission of the offence is a director, chief executive officer, manager, or other similar officer or a partner of the company, firm, society or other body of person or was purporting to act in such capacity shall be deemed to be guilty of that offence unless he proves that the offence was committed without his consent or connivance and that he has exercised all such diligence as to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his functions in that capacity and to all the circumstances. Pursuant to Section 45 of EQA 1974, the Director General or any Deputy Director General of Environmental Quality or any other public officer or any local authority to which the Director General of Environmental Quality has delegated such power in writing, may compound any offence under EQA 1974 or the regulations made thereunder which is prescribed by the Minister to be a compoundable offence with a compound or fine not exceeding RM2,000. (c) Environmental Quality (Sewage) Regulations 2009 Pursuant to Section 4 of the Environmental Quality (Sewage) Regulations 2009 ( EQSR 2009 ), no person shall, without prior written notification to the Director General of Environmental Quality, discharge or release or permit the discharge or release of sewage onto or into any soil, or into any inland waters or Malaysian waters. Section 2 of the EQSR 2009 defines sewage as any liquid waste or wastewater discharge containing human, animal, domestic or putrescible matter in suspension or solution, and includes liquids containing chemicals in solution either in the raw, treated or partially treated form. Section 5 of the EQSR 2009 provides that an owner or occupier of a premise shall operate and maintain a sewage treatment system (i.e. any facility designed and constructed for the 71

80 REGULATORY OVERVIEW purpose of reducing the potential of the sewage to cause pollution) in accordance with sound engineering practice for the treatment of sewage and ensure that all components of the sewage treatment system are in good working condition. Further, the sewage treatment system shall be supervised by a competent person who has been certified as duly qualified by the Director General of Environmental Quality. The sewage discharge must adhere to acceptable conditions as stipulated in section 7 of EQSR SINGAPORE LAWS During the Track Record Period and up to the Latest Practicable Date, our Group had business operations in Singapore. As such, we are required to comply with the laws and regulations of Singapore. The following is a summary of the laws and regulations of Singapore that are material to our business at the Latest Practicable Date. We believe that the laws and regulations that may be applicable can be classified into the following categories; (i) business operation; (ii) employment matters and (iii) Hygiene and environment. 1. Business Operations Our business operations include the import, processing, packaging, and delivery of meat products, mainly broilers and Kampung chicken meat products. The Agri-Food & Veterinary Authority ( AVA ) of Singapore administers the Wholesome Meat and Fish Act, (Cap 349A) ( WMFA ), where every business operator has a duty to take such measures as are necessary to ensure the food safety and standards of the processed meat and poultry at food establishments. Any license or permit granted under the WMFA is strictly not transferable and the benefits of the license shall not be assigned to any other party except to whom the license had been granted to. Persons in contravention of the rule shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$10,000. (a) Wholesome Meat and Fish (Processing Establishment and Cold Stores) Rules, (Cap 349A) Food Processing Establishments Under the Sale of Food Act, the AVA licences food processing establishments where food is manufactured, processed, prepared or packed for the purpose of distribution to wholesalers and retailers. The AVA also registers food storage warehouses that are used for commercial storage of food. Boong Poultry has obtained a food processing establishment licence which is valid until 28 February 2018 for the purpose of beef, chickens and mutton in our premises at 15 Woodlands Loop #01-22 Singapore Inspections by the AVA The AVA carries out annual grading assessment of food processing establishments, cold stores and slaughter-houses to ensure that licensees and their food production personnel adhere to good manufacturing practices (GMPs) and implement food safety programs such as HACCP to ensure safe production of food fit for human consumption. 72

81 REGULATORY OVERVIEW All licenced food establishments (including cold stores, slaughter-houses and food processing establishments) in Singapore are categorised into 4 grades: (i) A (Excellent); (ii) B (Good); (iii) C (Average); (iv) D (Pass). Each food establishment will be graded annually based on its food hygiene and food safety standards before its licence expires. Under the WMFA, the AVA may issue a stern written warning or collect a composition sum as stipulated under the WMFA and the Sale of Food Act. For cases of severe violations which infringe food safety, the AVA may suspend or revoke the license that was issued to the licensee until rectification works have been completed satisfactorily. Employees of Boong Poultry and Boong Food receive adequate training and abide by the hygiene standards when handling food at the food processing establishment. (b) Wholesome Meat and Fish (Import, Export and Transshipment) Rules, (Cap 349A) Pre-requisites of Licensing The import, export and transhipment of meat, poultry or fish products are regulated by AVA, Quarantine and Inspection Department (QID), Import & Export Regulation Division (IERD), Food Section. To maintain business operations of trading meat, poultry or fish products in Singapore, all traders are required to be incorporated as a company, and registered with the Accounting and Corporate Regulatory Authority of Singapore (ACRA), and possess a trader s license with the AVA. Any person who imports, exports or transships any meat product or fish product without a license; or fails to comply with the conditions for a license shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 2 years or to both and, in the case of a second or subsequent conviction, to a fine not exceeding $100,000 or to imprisonment for a term not exceeding 3 years or to both. Regulations as to Import, Export and Transshipping of Poultry, Meat, or Fish Products Live poultry, meat, or fish products may only be imported from selected countries approved by the AVA. Our broilers and Kampung chickens are sourced from AVA accredited farms in Malaysia and our beef and mutton are sourced locally from Singapore. An import permit is required for each consignment of importing primary food products and processed food. The cargo clearance permit is submitted upon arrival at the cargo clearance terminal. Each consignment of meat product imported should be accompanied by a veterinary health certificate certifying that the Singapore s AVA health standards have been complied with. Persons failing to comply with the requirements shall be found guilty of an offence punishable with a fine not exceeding S$10,000 upon conviction. 73

82 REGULATORY OVERVIEW The AVA conduct inspections on imported poultry, meat, and fish products and examines each consignment of meat imports for wholesomeness or presence of disease or spoilage consignments that are unfit for human consumption are either destroyed or sent back to the country of origin. (c) Wholesome Meat and Fish (Transportation of Meat Products) Rules (Cap 349A) The Wholesome Meat and Fish (Transportation of Meat Products) Rules regulate the manner in which meat products are to be conveyed from place to place and provide for the inspection of conveyances carrying or intended to be used for carrying meat products. The transport container or vehicle for chilled or frozen meat products must not be used and has not been used (i) for the transportation of any other material or substance that might adulterate or contaminate the meat product or otherwise cause the meat product to be unfit for human consumption; or (ii) for any other purpose which would render it unsuitable for use in the transportation of meat products. The vehicle or transport container must be equipped and capable of maintaining the meat product at a temperature of 4 C or below and with a core temperature not exceeding 7 C during transportation, or at a temperature of 18 C or below and with a core temperature not exceeding 12 C during transportation for frozen products. Any person who contravenes or fails to comply with any of the requirements of this rule shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$10,000. (d) Animals and Birds Act, (Cap 7) Section 8 (1) of the Animal and Birds Act states that no person shall import or transship any animal, bird or veterinary biologics without a license issued by AVA. Persons in contravention of the section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$10,000 or to imprisonment for a term not exceeding 12 months or to both. Boong Poultry has obtained the licence to import broiler chickens from AVA for the purpose of importing into Singapore live broiler chickens for consumption from AVA approved chicken farms in Malaysia. (e) Sale of Food Act, (Cap 283) Regulation 5 of the Sale of Food (Food Establishments) Regulations ( SFFER ) requires a licensee holding a food processing establishment licence to exhibit such licence in a conspicuous position within the licenced food establishment. The SFFER also provides that a licensee holding a food processing establishment licence must adhere to certain requirements, including ensuring that food is stored in such a way that it is protected from the likelihood of contamination and that the environmental conditions under which it is stored will not adversely affect the safety and suitability of the food and maintaining prescribed standards of personal cleanliness in relation to persons who are engaged in the preparation of food. 74

83 REGULATORY OVERVIEW All employees must be free from any infectious disease and no employee who is suffering from such disease should continue employment at the food establishment. The AVA may exercise its powers to require any persons suspected to have the infected disease to be subjected to medical examination and/or treatment, and to revoke or suspend the license of the Company where the licensee is found to carry an infectious disease, or knowingly employs any person with an infectious disease. Any person who contravenes any provision of the Sale of Food Act (Chapter 283) ( SFA ) shall be guilty of an offence and may be arrested without warrant by any police officer or authorized officer and taken before a Magistrate s Court. (f) Food Regulations, (Cap 283) It is further set out in the Food Regulations the standards and particular labelling requirements for food relating to meat and meat products. The Food Regulation requires that no false or misleading statements are used on food labels and for raw prepacked meat to be marked with dates. Boong Food has obtained the licence for import, export, and transshipment of meat products and fish products into Singapore, certifying that it has been approved by the Director General for the purpose of carrying out the business of importing, transporting and wholesale of meat and poultry in Singapore. (g) Halal Certification Boong Poultry is involved in the business of wholesale of Halal chicken meat products. As such, it is subjected to the rules under the Administration of Muslim Law Act (Chapter 3) ( AMLA ). The AMLA provides for the granting of Halal certificates in relation to any product, service or activity. A Halal certificate as defined in the AMLA means, in relation to any product, service or activity, a certificate to the effect that the requirements of the Muslim law are complied with in the production, processing, marketing, display or carrying out, as the case may be, of that product, service or activity. All halal certified premises are required to display the original copy of the certificate issued. Majlis Ugama Islam Singapura, also known as the Islamic Religious Council of Singapore ( MUIS ), regulates the issuance halal certificate in relation to the operation food establishments, including meat processing establishments, to ensure that the requirements of the Islamic Laws are complied with in the operation of the establishment. The certificate is usually granted for a period of one (1) year or (2) years and is renewable at the discretion of the MUIS. The MUIS may revoke or suspend its approval granted to any person to issue any halal certificate if that person fails to comply with any condition imposed. Halal certification of poultry comes under the Poultry Scheme for business owners who are involved in the principal business of wholesale and retail of poultry. The Poultry Scheme is applicable 75

84 REGULATORY OVERVIEW to selected fresh whole poultry which are slaughtered in Singapore. On the other hand, the Product Scheme is applicable to poultry cut pieces and poultry slaughtered outside Singapore. The scope of certification includes poultry feed, transportation, receiving, stunning, slaughtering, scalding, de-feathering, evisceration, labelling, sorting and storage of poultry. Under Section 88A (5) of AMLA, any person who, without the approval of the MUIS, issues a halal certificate in relation to any product, service or activity; or uses any specified halal certification mark or any colourable imitation thereof shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$10,000 or to imprisonment for a term not exceeding 12 months or to both. 2. Employment Matters Employment Act (Cap 91) The Employment Act, (Cap 91) of Singapore ( Employment Act ) is administered by the Ministry of Manpower ( MOM ) and sets out the basic terms and conditions of employment and the rights and responsibilities of employers as well as employees who are covered under the Employment Act. Under the Employment Act, a workman is defined as including, inter alia, (a) any person, skilled or unskilled, who has entered into a contract of service with an employer in pursuance of which he is engaged in manual labour, including any apprentice, (b) any person employed partly for manual labour and partly for the purpose of supervising in person any workman in and throughout the performance of his work. Any person employed in a managerial or an executive position (who is generally not regarded as an employee under the Employment Act) who is in receipt of a salary not exceeding S$4,500 shall be regarded as an employee for the purposes of provisions in the Employment Act relating to, inter alia, payment and computation of salaries, powers of the Commissioner for Labour ( Commissioner ) in relation to claims, complaints and investigations into offences under the Employment Act and procedures and regulations governing claims and offences under the Employment Act. Part IV of the Employment Act contains provisions relating to, inter alia, working hours, overtime, rest days, holidays, annual leave, payment of retrenchment benefit, priority of retirement benefit, annual wage supplement and other conditions of work or service and apply to: (a) workmen earning basic monthly salaries of not more than S$4,500 and (b) employees (excluding workmen) earning basic monthly salaries of not more than S$2,500. Section 38(8) of the Employment Act provides that a relevant employee is not allowed to work for more than 12 hours in any one day except in specified circumstances, such as where the work is essential to the life of the community, defence or security. In addition, section 38(5) of the Employment Act limits the extent of overtime work that a relevant employee can perform to 72 hours a month. Employers must seek the prior approval of the Commissioner for exemption if they require a relevant employee or class of relevant employees to work for more than 12 hours a day or work 76

85 REGULATORY OVERVIEW overtime for more than 72 hours a month. The Commissioner may, by order in writing exempt such relevant employees from the overtime limits subject to such conditions as the Commissioner thinks fit. Where such exemptions have been granted, the employer shall display the order or a copy thereof conspicuously in the place where such employees are employed. Paid public holidays and sick leave apply to all employees who are covered by the Employment Act regardless of salary levels. From 1 April 2016, employers are required to implement enhanced administrative requirements for employees covered under the Employment Act the Employment (Amendment) Act 2015 requires employers to (i) provide itemised payslips to all employees; (ii) provide employees with written key employment terms ( KETs ); and (iii) keep detailed employment records for each employee. KETs include, inter alia, full name of employer and employee, job title, duties and responsibilities, start date of employment, duration of employment, basic salary, fixed allowances, fixed deductions, overtime pay, leave, medical benefits, probation period and notice period. KETs which are not applicable to specific employees may be excluded from their contracts. Employment of foreign workers in Singapore The MOM regulates the employment of foreign workers in Singapore which is governed by the Employment of Foreign Manpower Act, (Cap 91A) ( EFMA ) and the regulations issued pursuant to the EFMA. The Employment Act is equally applicable to foreign workers. Under Section 5(1) of the EFMA, no person shall employ a foreign employee in Singapore unless he has obtained in respect of the foreign employee a valid work pass from the MOM, which allows the foreign employee to work for him. Any person who fails to comply with or contravenes Section 5(1) of the EFMA shall be guilty of an offence and shall be liable on conviction to a fine of not less than S$5,000 and not more than S$30,000 or to imprisonment for a term not exceeding 12 months or to both. Manufacturing Sector Food processing companies holding a valid licence from the AVA would be classified under the manufacturing sector. Additionally, being under the manufacturing sector, our Group must possess a valid factory notification or registration; use machinery to manufacture or produce items from raw materials; and operates in a designated industrial setting area. Employment of Foreign Manpower (Levy) Order 2011 The number of work permit holders may be hired by a company is limited by quota (or dependency ratio ceiling) and subject to a levy. The levy rates are tiered so that those who hire close to the maximum quota will pay a higher levy. 77

86 REGULATORY OVERVIEW The quota for the manufacturing sector is categorized into tiers 1, 2, and 3, and the levy rates differ according to Basic Skilled workers and Higher Skilled workers. The levy rates are generally calculated in months, while the daily levy rate only applies to work permit holders who did not work for a full calendar month. The daily levy rate is calculated as follows: (Monthly levy rate X 12) / 365 = rounding up to the nearest cent. Higher Skilled Employers pay fewer levies for higher skilled foreign workers who have certain qualifications. For example, foreign workers from Malaysia who possesses the Sijil Pelajaran Malaysia, foreign workers from NAS countries with High School Certificates, and workers from the PRC with Diploma are categorized as Higher Skilled Workers who have passed the Skill Evaluation Test (SET) Level 1 conducted by the Institute of Technical Education (ITE) and obtained the National ITE Certificate. Lastly, workers who have Workforce Skills Qualification (WSQ) have passed the Composite Assessment for Generic Manufacturing (CGM) are categorized as Higher Skilled as well. Dependency ceilings Dependency ratio ceiling (DRC) refers to the maximum permitted ratio of foreign workers to the total workforce that a company in the stipulated sector is allowed to hire. For example, the dependency ratio ceiling in the manufacturing sector is 60%. Hence, up to 60% of a manufacturing company s total workforce (sum of local workers, S pass and work permit holders) may consist of S pass and work permit holders. S pass is a type of valid pass issued by the MOM for mid-skilled staff who earns at least S$2,200 a month and who meet certain eligibility criteria. Central Provident Fund Act, (Cap 36) The central provident fund ( CPF ) system is a mandatory social security savings scheme funded by contributions from employers and employees. Under the Central Provident Fund Act, (Cap 36) ( CPFA ), an employer is obliged to make CPF contributions for all employees who are Singapore citizens or permanent residents who are employed in Singapore under a contract of service (save for employees who are employed as a master, a seaman or an apprentice in any vessel, subject to an exception for non-exempted owners). CPF contributions are not applicable for foreigners who hold employment passes, S passes or work permits. CPF contributions are required for both ordinary wages and additional wages (subject to a yearly additional wage ceiling) of employees at the applicable prescribed rates which is dependent on, inter alia, the amount of monthly wages and the age of the employee. An employer must pay both the employer s and employee s share of the monthly CPF contribution. However, an employer can recover the employee s share of CPF contributions by deducting it from their wages when the contributions are paid for that month. 78

87 REGULATORY OVERVIEW Work Injury Compensation, (Cap 345) The Work Injury Compensation Act, (Cap 345) ( WICA ), which is regulated by the MOM, applies to workmen in all industries (regardless of their level of earnings) in respect of injury suffered by them in the course of their employment and sets out, amongst others, the amount of compensation they are entitled to and the method(s) of calculating such compensation. The WICA does not cover self-employed persons or independent contractors. The WICA provides that where any person (referred to as the principal) in the course of its business or for the purpose of his trade or business contracts with any other person (referred to as the contractor), the principal shall be liable to compensate the employees of the contractor who were injured while employed in the execution of the work for the principal. Under the WICA, every employer is required to insure and maintain insurance under approved policies with an insurer against all liabilities which he may incur under the provisions of the WICA in respect of all employees employed him, unless specifically exempted. The WICA provides that if an employee dies or sustains injuries in a work-related accident or contracted occupational diseases in the course of the employment, the employer shall be liable to pay compensation in accordance with the provisions of the WICA. Wage Credit Scheme In Budget 2013, the Singapore Government introduced the wage credit scheme as a three-year scheme under which the Singapore Government co-funds 40% of the wage increases that are given in 2013 to 2015 to Singapore citizen employees earning a gross monthly wage of S$4,000 and below. In Budget 2015, it was announced that the wage credit scheme would be extended for two years (2016 to 2017). New wage increases given from 2016 to 2017 will be co-funded at 20% instead of 40%. For wage increases given in 2015 which are sustained in 2016 and 2017 by the same employer, employers will receive 20% co-funding for two additional years from 2016 to Only employers are eligible for co-funding. Employers do not need to apply for wage credit. Wage credits are automatically paid to eligible employers annually, based on the CPF contributions that they make for their employees. Environmental Protection and Management Act (Cap 94A) The Environmental Protection and Management Act (Cap 94A) of Singapore ( EPMA ) seeks to control the levels of pollution in Singapore by regulating the activities of various industries and regulates, inter alia, air pollution, water pollution, land pollution and noise control. The EMPA prohibits, inter alia, (i) the use or burning of any or any class of combustible material, fuel burning equipment or industrial plant within such area as prescribed by the National Environment Agency, (ii) the discharge of any trade effluent, oil, chemical, sewage or other polluting matters into any drain or land without a requisite licence and (iii) the discharge of any hazardous substances into inland waters. Under the provisions of the EMPA, we are subject to periodic inspections by the National Environment Agency to ensure that the proper measures of pollution control in relation to water and air pollution are duly complied with. 79

88 HISTORY, REORGANISATION AND CORPORATE STRUCTURE OVERVIEW Our Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law on 25 October 2017 in preparation for the [REDACTED] and is the holding company of our Group. As at the Latest Practicable Date, in addition to our Company, our Group had 12 subsidiaries. Details of these subsidiaries and the corporate structure of our Group are set out in the sub-section headed Establishment and development of the subsidiaries of our Company in this section. Prior to the [REDACTED], our Group underwent the Reorganisation and immediately following the completion of the Reorganisation, Upon Global Investments, Stanmer Investments and Ruby Garden Global will hold the entire issued share capital of our Company. Immediately following the completion of the Capitalisation Issue and the [REDACTED], Upon Global Investments, Stanmer Investments and Ruby Garden Global will own in aggregate [REDACTED]% of the issued share capital in our Company (without taking into account any Share which may be allotted and issued upon exercise of any option which may be granted under the Share Option Scheme). BUSINESS DEVELOPMENT Our Group s history can be traced back to the establishment of Boong Poultry, one of our operating subsidiaries, in Singapore in 1994 by our executive Director and Chairman of the Board Dato Tan. At the time of incorporation, Boong Poultry was mainly engaged in the export of Kampung chickens and broilers from Malaysia to Singapore. Before the establishment of Boong Poultry, Dato Tan worked in Thong Hing Trading, a sole proprietorship established by his parents in 1984, where he was primarily involved in the trading of live chickens in Singapore. Having accumulated more than five years of practical experience, Dato Tan founded his sole proprietorship in Malaysia in 1990, which engaged in the trading of Kampung chickens and broilers in Singapore before the cessation of its operation before the Track Record Period. In 1994, the first subsidiary of our Group, namely Boong Poultry, was established in Singapore. In 2007, Aqina Poultry (formerly known as Boong Farming Sdn. Bhd. and Aqina Feedmill Sdn. Bhd.) was incorporated to engage in the trading of chicken feeds at that time in Malaysia. In the same year, Dato Tan started to invest in Aqinajaya by acquiring 50% of its share capital from Dato Tan Peck Sim, a former director of Aqinajaya, in order to venture into chicken meat slaughtering and processing and sale of chicken meat products to complement our business. Aligned with the growth of our business, Aqina Farming, one of our principal operating subsidiaries, was incorporated in 2009 to specialise in breeding of Kampung chickens. In 2014, Wilayah Food Trading was incorporated in Malaysia for sourcing and sales of live chickens and provision of chicken slaughtering services. 80

89 HISTORY, REORGANISATION AND CORPORATE STRUCTURE In 2016, Boong Food was incorporated in Singapore to trade non-chicken meat products, which allowed us to cater for non-halal customers. In the same year, in order to effectively manage different types of customers, Aqina Trading started to sell halal processed chicken meat products to mini-markets and hawker stalls. With a reputation in the market, our Group expanded into a semi-integrated operation by having our own Kampung chicken breeding farms, Slaughtering Plant in Malaysia and ancillary logistics vehicles services. As at the Latest Practicable Date, our Group operated 10 breeding farms for Kampung chickens of which three were MyGAP-certified and approved by the Agri-Food & Veterinary Authority of Singapore, which enable us to export live Kampung chickens reared in these farms to Singapore. Set forth below is a chronological review of the key business milestones of our Group: Date Milestones 1994 Boong Poultry was incorporated in Singapore which mainly engaged in the export of Kampung chickens and broilers from Malaysia to Singapore Dato Tan invested in Aqinajaya to venture into chicken meat slaughtering and processing business and sale of chicken meat products. Aqina Poultry was established to engage in the trading of chicken feeds at that time in Malaysia Aqina Farming was incorporated in Malaysia which specialised in breeding of Kampung chickens Wilayah Food Trading was incorporated in Malaysia for the sourcing and sales of live chickens and provision of chicken slaughtering services Wilayah Food Trading obtained the manufacturing licence issued by the Ministry of International Trade and Industry of Malaysia regarding our Slaughtering Plant in Malaysia Boong Poultry was accredited with ISO22000:2005 for its quality food safety management systems. Aqinajaya obtained Halal Certificates from the Department of Islamic Development Malaysia for poultry processed products and dressed chickens. Wilayah Food Trading obtained Halal Certificates from the Department of Islamic Development Malaysia for various chicken parts, soup mix and slaughtering chickens. Aqina Poultry expanded its product portfolio to trade halal processed products with food and beverage chains in Malaysia Aqinajaya obtained a Halal Certificate from the Department of Islamic Development Malaysia for poultry spare parts and halal chicken products and was accredited with a MeSTI Certificate from the Ministry of Health of Malaysia. 81

90 HISTORY, REORGANISATION AND CORPORATE STRUCTURE ESTABLISHMENT AND DEVELOPMENT OF THE SUBSIDIARIES OF OUR COMPANY As at the Latest Practicable Date, in addition to our Company, our Group comprised of 12 subsidiaries. Set out below is the corporate history of our Company and each of our major subsidiaries. Our Company Our Company, being the [REDACTED] vehicle of our Group, was incorporated in the Cayman Islands as an exempted company with limited liability on 25 October 2017 and has been registered as a non-hong Kong company under Part 16 of the Companies Ordinance on 30 November As at the date of incorporation, our Company had an authorised share capital of HK$380,000 divided into 38,000,000 Shares of par value HK$0.01 each, of which one Share was allotted and issued as fully paid to the initial subscriber at par, which was then transferred to Upon Global Investments. For further details of the Reorganisation, please refer to the paragraph headed Reorganisation in this section below. Alpha Element Alpha Element was incorporated in the BVI with liability limited by shares on 28 August Since the date of incorporation, Alpha Element is authorised to issue a maximum of 50,000 shares of a single class of par value US$1 each. On 4 September 2017, 100 ordinary shares were allotted and issued as fully paid to Gallus Investments, representing all the issued shares of Alpha Element. As at the Latest Practicable Date, Alpha Element was an investment holding company. Aqina Farming On 9 January 2009, Aqina Farming was incorporated in Malaysia with an authorised share capital of RM100,000 divided into 100,000 ordinary shares of RM1 each. On the same date, one share was allotted and issued at par to Mr. Koo Chong Teck, a former director of Aqina Farming; and 99 shares were allotted and issued at par to Dato Tan. On 10 January 2009, both Dato Tan and Mr. Koo Chong Teck transferred their entire shareholdings in Aqina Farming to Aqina Holdings at the total consideration of RM100 and such transfers were properly and legally completed. After the said transfer, Aqina Farming was a wholly-owned subsidiary of Aqina Holdings. On 23 July 2010, 27 October 2010, 1 October 2012 and 19 November 2015, an aggregate of 1,499,900 shares were allotted and issued at par to Aqina Holdings. As at the Latest Practicable Date, Aqina Farming mainly engaged in Kampung chicken breeding and sales of Kampung chicken in Malaysia. 82

91 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Aqina Holdings On 25 September 2007, Aqina Holdings was incorporated in Malaysia with an authorised share capital of RM100,000 divided into 100,000 shares of RM1 each. On the same date, 99 shares were allotted and issued at par to Dato Tan and one share was allotted and issued at par to Datin Teo. On 27 May 2009, Aqina Holdings allotted and issued at par 98,901 shares to Dato Tan and 999 shares to Datin Teo, respectively. After the said allotment, Aqina Holdings was owned as to 99% by Dato Tan and 1% by Datin Teo, respectively. On 1 April 2010, Dato Tan transferred 19,000 shares in Aqina Holdings to Datin Teo at par and such transfer was properly and legally completed. On 1 August 2012, 720,000 shares were allotted and issued at par to Dato Tan; and 180,000 shares were allotted and issued at par to Datin Teo. After the said allotment, Aqina Holdings was owned as to 80% by Dato Tan and 20% by Datin Teo, respectively. On 1 September 2017, Aqina Holdings and Ruby Garden Global entered into a subscription agreement, pursuant to which Ruby Garden Global agreed to subscribe for, and Aqina Holdings agreed to procure its holding company (which is later known as Gallus Investments) to allot and issue 13.0% of its then issued shares to Ruby Garden Global at a consideration of HK$15,000,000. Subsequently, 1,300 ordinary shares of Gallus Investments were properly and legally allotted and issued to Ruby Garden Global on 29 September On 4 September 2017, as part of the Reorganisation, Alpha Element entered into a share transfer agreement to acquire the entire issued share capital of Aqina Holdings from Dato Tan and Datin Teo at the consideration of USD187,272 and USD46,818, respectively. Such transfers were properly and legally completed. After such transfers of shares, Aqina Holdings became wholly-owned by Alpha Element. Upon completion of the Reorganisation, Aqina Holdings became an indirect wholly-owned subsidiary of our Company, details of which are set out in the paragraph headed Reorganisation in this section below. As at the Latest Practicable Date, Aqina Holdings was an investment holding company which also provided administrative and accounting services to its subsidiaries in Malaysia. Aqina Poultry On 25 September 2007, Dato Tan and Datin Teo co-founded Aqina Poultry in Malaysia under the name of Boong Farming Sdn. Bhd. with an authorised share capital of RM100,000 divided into 100,000 ordinary shares of RM1 each. On the same date, one share was allotted and issued at par to each of Dato Tan and Datin Teo, respectively. The name of Boong Farming Sdn. Bhd. was changed to Aqina Feedmill Sdn. Bhd. with effect from 1 January 2009 which was subsequently changed to Aqina Poultry Sdn. Bhd. with effect from 24 August

92 HISTORY, REORGANISATION AND CORPORATE STRUCTURE On 18 October 2007, Dato Tan and Datin Teo transferred an aggregate of two shares, representing all of their shareholdings in Aqina Poultry, to Aqina Holdings at par and such transfers were properly and legally completed. On 21 July 2008, 499,998 shares were allotted and issued at par to Aqina Holdings. On 28 February 2016, Aqina Holdings transferred 250,000 shares in Aqina Poultry to each of Mr. Wesley Tan and Mr. Tan Ah Kok, brother of Dato Tan, at par respectively. Pursuant to a confirmatory deed executed by each of Mr. Wesley Tan and Mr. Tan Ah Kok on 18 December 2017, each of Mr. Wesley Tan and Mr. Tan Ah Kok confirmed that he held the aforesaid 250,000 shares on trust for and on behalf of Aqina Holdings (which was owned as to 80% by Dato Tan and 20% by Datin Teo at the time). At the direction of Aqina Holdings, each of them transferred back the said shares to Aqina Holdings on 9 May 2017 at par and such transfers were properly and legally completed. Upon completion of the Reorganisation, Aqina Poultry became an indirect wholly-owned subsidiary of our Company, details of which are set out in the paragraph headed Reorganisation in this section below. As at the Latest Practicable Date, Aqina Poultry mainly engaged in sales of halal chicken meat products to food and beverage chains in Malaysia. Aqina Trading On 14 September 2015, Aqina Trading was incorporated under the name of Aqina Biotech Industries Sdn. Bhd., with an authorised share capital of RM400,000 divided into 400,000 shares of RM1 each. On the same date, one share was allotted and issued at par to each of Dato Tan and Mr. Wesley Tan, respectively. Pursuant to a confirmatory deed executed by Mr. Wesley Tan on 18 December 2017, Mr. Wesley Tan confirmed that he held the one share on trust for and on behalf of Dato Tan. On 28 February 2016, Dato Tan transferred his one share in Aqina Trading to Aqina Holdings at par; and Mr. Wesley Tan, at the direction of Dato Tan, transferred his one share in Aqina Trading to Aqina Holdings at par. Such transfers were properly and legally completed. After the said transfers, Aqina Trading became a wholly-owned subsidiary of Aqina Holdings. On 27 April 2016, the name of Aqina Biotech Industries Sdn. Bhd. was changed to Aqina Trading. Upon completion of the Reorganisation, Aqina Trading became an indirect wholly-owned subsidiary of our Company, details of which are set out in the paragraph headed Reorganisation in this section below. As at the Latest Practicable Date, Aqina Trading mainly engaged in the sales of halal processed chicken meat products to mini-markets in Malaysia. 84

93 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Aqinajaya On 28 January 2005, Aqinajaya was incorporated in Malaysia with an authorised share capital of RM100,000 divided into 100,000 shares of RM1 each. On the same date, one share was allotted and issued at par to each of Mr. Loh Kuan Chween and Mr. Yap Liee Mee (both were initial subscribers and former directors of Aqinajaya), respectively. On 28 March 2005, (i) Mr. Loh Kuan Chween transferred his one share in Aqinajaya to Dato Tan Peck Sim, a former director of Aqinajaya at par; and (ii) Mr. Yap Liee Mee transferred his one share in Aqinajaya to Dato Abdul Aziz Bin Bakar, who is one of the directors of Aqinajaya, at par. Such transfers were properly and legally completed. After the said transfers, Aqinajaya was owned as to 50% by each of Dato Tan Peck Sim and Dato Abdul Aziz Bin Bakar, respectively. On 3 January 2007, Dato Tan Peck Sim transferred his one share in Aqinajaya to Dato Tan at the consideration of RM 1. Such transfer was properly and legally completed. After the said transfer, Aqinajaya was owned as to 50% by each of Dato Tan and Dato Abdul Aziz Bin Bakar respectively. On 2 February 2007, 25,500 shares of Aqinajaya were allotted and issued at par to Dato Abdul Aziz Bin Bakar; and 24,500 shares of Aqinajaya were allotted and issued at par to Dato Tan. On 28 March 2007, 102,000 shares of Aqinajaya were allotted and issued at par to Dato Abdul Aziz Bin Bakar; and 98,000 shares of Aqinajaya were allotted and issued at par to Dato Tan. After the said allotments, Aqinajaya was owned as to 51% by Dato Abdul Aziz Bin Bakar and 49% by Dato Tan, respectively. On 1 April 2010, Dato Tan transferred 122,501 shares of Aqinajaya, representing all of his shareholdings in Aqinajaya, to Aqina Holdings at par and such transfer was properly and legally completed. After the said transfer, Aqinajaya was owned as to 51% by Dato Abdul Aziz Bin Bakar; and 49% by Aqina Holdings respectively. On 31 March 2012, 127,499 shares of Aqinajaya were allotted and issued at par to Dato Abdul Aziz Bin Bakar; and 122,499 shares of Aqinajaya were allotted and issued at par to Aqina Holdings. After the said allotment, Aqinajaya was owned as to 51% by Dato Abdul Aziz Bin Bakar and 49% by Aqina Holdings. Notwithstanding our Group held only 49% equity interest in Aqinajaya, due to the facts that there are arrangements among the shareholders of Aqinajaya for Aqina Holdings to appoint majority of the board of the directors of Aqinajaya and other key management personnel of Aqinajaya and to control Aqinajaya s operation by making all significant strategic financial and operating decisions of Aqinajaya of our Group. Aqinajaya was treated as a non-wholly subsidiary of our Group. For further details, please refer to Note 1 to the Accountants Report set out in Appendix I to this document. On 28 February 2016, Aqina Holdings transferred an aggregate of 245,000 shares in Aqinajaya to Mr. Tan Ah Kok, brother of Dato Tan at par. Pursuant to a confirmatory deed executed by Mr. Tan Ah Kok on 18 December 2017, Mr. Tan Ah Kok confirmed that he held the aforesaid 245,000 shares on trust for and on behalf of Aqina Holdings (which was owned as to 80% by Dato Tan and 20% by Datin Teo at the time). At the direction of Aqina Holdings, the aforesaid 245,000 shares were transferred back to Aqina Holdings at par on 9 May

94 HISTORY, REORGANISATION AND CORPORATE STRUCTURE On 4 September 2017, as part of the Reorganisation, Aqina Holdings entered into a share transfer agreement to acquire 255,000 shares of Aqinajaya from Dato Abdul Aziz Bin Baker at the consideration of RM255,000 and such transfer was properly and legally completed. Such consideration was determined with reference to the issued share capital of Aqinajaya. After the said transfer of shares, Aqinajaya became wholly-owned by Aqina Holdings. Following the disposal of his shareholding in Aqinajaya, Dato Abdul Aziz Bin Bakar resigned as a director of Aqinajaya on 22 January Upon completion of the Reorganisation, Aqinajaya became an indirect wholly-owned subsidiary of our Company, details of which are set out in the paragraph headed Reorganisation in this section below. As at the Latest Practicable Date, Aqinajaya was mainly engaged in the halal chicken meat products processing and the sales of halal chicken meat products to customers in Malaysia. Boong Farming On 19 June 2009, Boong Farming was incorporated in Malaysia with an authorised share capital of RM100,000 divided into 100,000 shares of RM1 each. On the same date, 90 shares were allotted and issued at par to Dato Tan; and 10 shares were allotted and issued at par to Mr. Tan Kim Joo, cousin of Dato Tan and a former director of Boong Farming. On the same date, Dato Tan transferred 90 shares to Aqina Holdings at par; and Mr. Tan Kim Joo transferred 10 shares to Aqina Holdings at par and such transfers were properly and legally completed. After the said transfer, Boong Farming was a wholly-owned subsidiary of Aqina Holdings. On 11 October 2016, 249,900 shares were further allotted and issued at par to Aqina Holdings. As at the Latest Practicable Date, Boong Farming primarily engaged in the provision of ancillary logistics services in Malaysia and Singapore. Boong Food On 5 February 2016, Boong Food was incorporated in Singapore with an authorised share capital of SGD100 divided into 100 shares of SGD1 each. On the same date, 100 shares were allotted and issued at SGD100 to Datin Teo. On 28 November 2016, Boong Food allotted 50,000 shares at SGD50,000 to Datin Teo. On 17 July 2017, Datin Teo transferred 30,060 shares in Boong Food to Aqina Holdings at SGD3,006. The transfers were properly and legally completed. After the said transfers, Boong Food was owned as to 60% by Aqina Holdings and 40% by Datin Teo. On 5 December 2017, as part of the Reorganisation, Datin Teo entered into a share transfer agreement to transfer 20,040 shares in Boong Food to Aqina Holdings at the consideration of SGD46, Such consideration was determined with reference to the net asset value of Boong Food as at 30 September Such transfer was properly and legally completed. After the said transfer, Boong Food became a wholly-owned subsidiary of Aqina Holdings. 86

95 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Upon completion of the Reorganisation, Boong Food became an indirect wholly-owned subsidiary of our Company, details of which are set out in the paragraph headed Reorganisation in this section below. As at the Latest Practicable Date, Boong Food mainly engaged in trading of non-chicken meat products in Singapore. Boong Poultry On 11 March 1994, Boong Poultry was incorporated in Singapore with an authorised share capital of SGD100,000 divided into 100,000 of SGD1 each. On the same date, one share was allotted and issued at SGD1 to Mr. Chan Cheng Lai, a former director of Boong Poultry, and nine shares were allotted and issued at SGD9 to Dato Tan. On 19 January 1996, Mr. Chan Cheng Lai transferred his one share in Boong Poultry to Mr. Chang Lak Huat at SGD1 (also a former director of Boong Poultry). Such transfer was properly and legally completed. On 15 March 1998, Mr. Chang Lak Huat transferred his one share in Boong Poultry to Mr. Goh Weng Siang, a former director of Boong Poultry, at SGD1. Such transfer was properly and legally completed. On 1 March 2005, Boong Poultry allotted 99,990 shares to Datin Teo at SGD99,990. On 1 April 2010, (i) Dato Tan transferred his nine shares in Boong Poultry to Aqina Holdings at SGD9; (ii) Datin Teo transferred 59,990 shares in Boong Poultry to Aqina Holdings at SGD59,990; and (iii) Mr. Goh Weng Siang transferred his one share in Boong Poultry to Aqina Holdings at par. Such transfers were properly and legally completed. After the said transfers, Boong Poultry was owned as to 60% by Aqina Holdings and 40% by Datin Teo. On 5 December 2017, as part of the Reorganisation, Datin Teo entered into a share transfer agreement to transfer 40,000 shares of Boong Poultry (representing 40% of the issued share capital of Boong Poultry) to Aqina Holdings at the consideration of SGD3,099,430 and such consideration was determined with reference to the net asset value of Boong Poultry as at 30 September The transfer was properly and legally completed. After the said transfer, Boong Poultry became wholly-owned by Aqina Holdings. Upon completion of the Reorganisation, Boong Poultry became an indirect wholly-owned subsidiary of our Company, details of which are set out in the paragraph headed Reorganisation in this section below. As at the Latest Practicable Date, Boong Poultry mainly engaged in the processing and sales of chicken meat products in Singapore. 87

96 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Gallus (Hong Kong) Gallus (Hong Kong) was incorporated in Hong Kong with limited liability on 21 August On the date of incorporation, Gallus (Hong Kong) allotted and issued as fully paid 100 shares, representing the entire issued share capital of Gallus (Hong Kong), to Gallus Investments at HK$100. Gallus (Hong Kong) was incorporated to establish a presence in Hong Kong. Gallus Investments Gallus Investments was incorporated in the BVI with liability limited by shares on 11 August Since its date of incorporation, Gallus Investments is authorised to issue a maximum of 50,000 shares of a single class of par value US$1 each. On the date of incorporation, 100 ordinary shares of Gallus Investments were allotted and issued as fully paid to Dato Tan, representing all the issued shares of Gallus Investments. On 4 September 2017, as part of the Reorganisation, (i) Dato Tan transferred 100 shares of Gallus Investments to Upon Global Investments, in consideration thereof, Upon Global Investments allotted and issued 100 shares at par to Dato Tan; and (ii) Gallus Investments allotted and issued 25 shares at par to Stanmer Investments. The transfer and allotment were properly and legally completed. On 5 September 2017, Gallus Investments allotted and issued (i) 6,860 shares to Upon Global Investments at the consideration of US$187,272; and (ii) 1,715 shares to Stanmer Investments at the Consideration of US$46,818. As at the Latest Practicable Date, Gallus Investments was an investment holding company. Wilayah Food Trading On 25 March 2014, Wilayah Food Trading was incorporated in Malaysia with an authorised share capital of RM400,000 divided into 400,000 shares of RM1 each. On the same date, (i) 30 shares of Wilayah Food Trading were allotted and issued at par to Dato Tan; (ii) 21 shares of Wilayah Food Trading were allotted and issued at par to Datin Teo; and (iii) 49 shares of Wilayah Food Trading were allotted and issued at par to Mr. Lim, a director of Wilayah Food Trading by then and a connected person under Chapter 20 of the GEM Listing Rules during the Track Record Period. Mr. Lim resigned as a director of Wilayah Food Trading with effect from 23 January On 7 April 2014, (i) 119,970 shares of Wilayah Food Trading were allotted and issued at par to Dato Tan; (ii) 83,979 shares of Wilayah Food Trading were allotted and issued at par to Datin Teo; and (iii) 195,951 shares of Wilayah Food Trading were allotted and issued at par to Mr. Lim, respectively. After the said allotments, Wilayah Food Trading was owned as to (i) 30% by Dato Tan; (ii) 21% by Datin Teo; and (iii) 49% by Mr. Lim, respectively. On 31 December 2014, Mr. Lim transferred 196,000 shares of Wilayah Food Trading, representing all of his shareholdings in Wilayah Food Trading, at par to Mutiara, a company engaged in wholesaling and retailing live poultry and owned by Mr. Lim and his family members. Such transfer was properly and legally completed. 88

97 HISTORY, REORGANISATION AND CORPORATE STRUCTURE On 10 February 2015, (i) 180,000 shares of Wilayah Food Trading were allotted and issued at par to Dato Tan; (ii) 126,000 shares of Wilayah Food Trading were allotted and issued at par to Datin Teo; and (iii) 294,000 shares of Wilayah Food Trading were allotted and issued at par to Mutiara, respectively. On 3 April 2017, (i) 490,000 shares of Wilayah Food Trading were allotted and issued at par to Mutiara; (ii) 210,000 shares of Wilayah Food Trading were allotted and issued at par to Datin Teo; and (iii) 300,000 shares of Wilayah Food Trading were allotted and issued at par to Dato Tan, respectively. On 31 May 2017, (i) Dato Tan transferred 600,000 shares in Wilayah Food Trading to Aqina Holdings at par; and (ii) Datin Teo transferred 420,000 shares in Wilayah Food Trading to Aqina Holdings at par, respectively. Such transfers were properly and legally completed. After the said transfers, Wilayah Food Trading was owned as to (i) 51% by Aqina Holdings; and (ii) 49% by Mutiara, respectively. On 23 January 2018, Aqina Holdings entered into a memorandum of understanding with Mutiara pursuant to which both parties shall negotiate in good faith for Aqina Holdings acquisition of Mutiara s 49% shareholding in Wilayah. Such transaction has not yet been completed up to the date of this document. As at the Latest Practicable Date, Wilayah Food Trading mainly engaged in sourcing and sales of live chickens and provision of chicken slaughtering services. [REDACTED] INVESTMENT Background of [REDACTED] Investors Ruby Garden Global is an investment holding company incorporated in the BVI on 4 July 2017 and the shares of which are legally and beneficially owned by Mr. Ngai, who is a fellow member of both the Institute of Chartered Accountants in Australia and Hong Kong Institute of Certified Public Accountants and has extensive experience in accounting, financial management and dealing with business development and investments. Mr. Ngai had previously worked for various listed companies in Hong Kong. Prior to its investment in our Group, Ruby Garden Global was an Independent Third Party. To the best knowledge and belief of our Directors, Ruby Garden Global decided to invest in our Group as it is interested in and is optimistic about the business prospect of our Group. The investment of Ruby Garden Global was financed by its internal financial resources. Investment On 1 September 2017, a subscription agreement was entered into between Aqina Holdings and Ruby Garden Global, pursuant to which Ruby Garden Global agreed to subscribe for, and Aqina Holdings agreed to procure its holding company to allot and issue 13% of its then issued capital to Ruby Garden Global. Subsequently, Gallus Investments issued and allotted 1,300 ordinary shares credited as fully paid to Ruby Garden Global at the total subscription price of HK$15,000,000. The subscription price was arrived at after arm s length negotiations between Gallus Investments and Ruby Garden Global with reference to the earnings before interest, taxes and depreciation based on the management account of our Group for the year ended 31 March 2017 and the risks assumed in 89

98 HISTORY, REORGANISATION AND CORPORATE STRUCTURE investing in our Group. The said 1,300 ordinary shares of Gallus Investments were properly and legally allotted and issued on 29 September After the said allotment, Gallus Investments was owned as to 69.6% by Upon Global Investments, 17.4% by Stanmer Investments and 13.0% by Ruby Garden Global, respectively. The table below sets out a summary of the details for the [REDACTED] Investment mentioned above: Name of [REDACTED] investor: Amount of consideration paid: Ruby Garden Global HK$15,000,000 Payment date of consideration in full: 29 September 2017 Number of shares of Gallus Investments subscribed: Investment cost per Share on the basis of the enlarged share capital of our Company immediately after completion of the [REDACTED] and the Capitalisation Issue and discount to mid-point of the [REDACTED] range: Use of proceeds from the [REDACTED] Investment: (Note) Benefit from the [REDACTED] Investment: Approximate shareholding in our Company after completion of the [REDACTED] and the Capitalisation Issue: Special rights: Lock-up: 1,300 shares (representing approximately 13.0% of the total issued share capital of Gallus Investments upon completion of the [REDACTED] Investment) approximately HK$[REDACTED], representing approximately [REDACTED]% discount to the mid-point of the indicative [REDACTED] range General working capital of our Group Our Directors believe that the investment made by Ruby Garden Global, as a shareholder of our Company, will bring strategic benefits to our Group by providing financing and strategic advice to our Group s business approximately [REDACTED]% Nil The Shares held by Ruby Garden Global are subject to a lock-up period of six months from the [REDACTED] Note: As at the Latest Practicable Date, approximately [REDACTED]% out of the net proceeds from the [REDACTED] Investment has been utilised. 90

99 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Public Float As each of Ruby Garden Global and its beneficial owner is not a connected person of our Company, Shares held by Ruby Garden Global will be counted towards the public float after the [REDACTED]. Sponsor s confirmation The Sole Sponsor has confirmed that the [REDACTED] Investment is in compliance with the Interim Guidance on [REDACTED] Investment issued on 13 October 2010 by the Stock Exchange and the Guidance Letter HKEx-GL43-12 issued in October 2012 and updated in July 2013 by the Stock Exchange based on their review of relevant documents. REORGANISATION Prior to the Reorganisation, the structure of our Group was as follows: Datin Teo 20% 80% Dato Tan 100% Gallus Investments (BVI) Aqina Holdings (Malaysia) Alpha Element (BVI) 100% 100% Gallus (Hong Kong) (Hong Kong) 40% 60% Mutiara Jaya Trading Sdn Bhd Dato Abdul Aziz Bin Bakar 100% 100% 100% 100% 51% 49% 49% 51% Boong Food (Singapore) Boong Poultry (Singapore) Aqina Farming (Malaysia) Aqina Poultry (Malaysia) Aqina Trading (Malaysia) Boong Farming (Malaysia) Wilayah Food Trading (Malaysia) Aqinajaya (Malaysia) Corporate restructuring To rationalise our Group s structure in preparation for the [REDACTED], our Group underwent various corporate restructuring as more particularly described as follows: (1) On 5 July 2017, Upon Global Investments was incorporated in BVI with liability limited by shares. At the date of its incorporation, Upon Global Investments is authorised to issue a maximum of 50,000 shares of a single class of par value US$1 each. On 4 September 2017, 100 ordinary shares, credited as fully paid, of Upon Global Investments were allotted and issued to Dato Tan. Upon Global Investments was set up as a vehicle of Dato Tan to hold his interests in our Company. 91

100 HISTORY, REORGANISATION AND CORPORATE STRUCTURE (2) On 13 July 2017, Stanmer Investments was incorporated in BVI with liability limited by shares. At the date of incorporation, Stanmer Investments is authorised to issue a maximum of 50,000 shares of a single class of par value US$1 each. On 4 September 2017, 100 ordinary shares, credited as fully paid, of Stanmer Investments were allotted and issued to Datin Teo. Stanmer Investments was set up as a vehicle of Datin Teo to hold her interests in our Company. (3) On 11 August 2017, Gallus Investments was incorporated in BVI with liability limited by shares. For further details of Gallus Investments, please refer of the paragraph headed Establishment and Development of the Subsidiaries of our Company Gallus Investments of this section. (4) On 21 August 2017, Gallus (Hong Kong) was incorporated in Hong Kong with limited liability. For further details of Gallus (Hong Kong), please refer of the paragraph headed Establishment and Development of the Subsidiaries of our Company Gallus (Hong Kong) of this section. (5) On 28 August 2017, Alpha Element was incorporated in BVI with liability limited by shares. For further details of Alpha Element, please refer of the paragraph headed Establishment and Development of the Subsidiaries of our Company Alpha Element of this section. (6) On 4 September 2017, Aqina Holdings entered into a share transfer agreement to acquire 255,000 shares of Aqinajaya (representing 51% of its issued share capital) from Dato Abdul Aziz Bin Bakar at a consideration of RM255,000. Such consideration was determined with reference to the issued share capital of Aqinajaya. (7) On 4 September 2017, Dato Tan transferred 100 ordinary shares of Gallus Investments (representing all the issued shares) to Upon Global Investments. In consideration thereof, Upon Global Investments allotted and issued 100 ordinary shares, credited as fully paid, to Dato Tan. (8) On 4 September 2017, Gallus Investments allotted and issued 25 ordinary shares (credited as fully paid) to Stanmer Investments. After the said allotment, Gallus Investments was owned as to 80% by Dato Tan and 20% by Datin Teo. (9) On 4 September 2017, (i) Dato Tan entered into a share transfer agreement to transfer 800,000 ordinary shares of Aqina Holdings; and (ii) Datin Teo entered into a share transfer agreement to transfer 200,000 ordinary shares of Aqina Holdings to Alpha Element at the consideration of USD187,272 and USD46,818 respectively. 92

101 HISTORY, REORGANISATION AND CORPORATE STRUCTURE (10) On 5 September 2017, Gallus Investments allotted and issued (i) 6,860 ordinary shares (credited as fully paid) to Upon Global Investments at the consideration of USD187,272; and (ii) 1,715 ordinary shares (credited as fully paid) to Stanmer Investments at the consideration of USD46,818. (11) On 1 September 2017, Ruby Garden Global and Aqina Holdings entered into a subscription agreement. Subsequent to which, Ruby Garden Global subscribed for, and Aqina Holdings procured Gallus Investments to allot and issue 1,300 ordinary shares (representing to 13.0% of all the issued shares) (credited as fully paid) to Ruby Garden Global at a consideration of HK$15,000,000. After the said issue and allotment of 1,300 shares of Gallus Investments on 29 September 2017, Gallus Investments was owned as to 69.6% by Upon Global Investments, 17.4% by Stanmer Investments, and 13.0% by Ruby Garden Global, respectively. (12) On 25 October 2017, our Company was incorporated in the Cayman Islands as an exempted company with limited liability with an authorised share capital of HK$380,000 divided into 38,000,000 Shares of par value HK$0.01 each, of which one subscriber Share was allotted and issued as fully paid to the subscriber (Reid Services Limited, an Independent Third Party and a subscriber arranged by the corporate services company who incorporated the company). Subsequently on the same date, the subscriber transferred one subscriber Share to Upon Global Investments. (13) On 5 December 2017, Datin Teo entered into a share transfer agreement to transfer 40,000 shares of Boon Poultry (representing 40% of the issued share capital) to Aqina Holdings at a consideration of SGD3,099,430. Such consideration was determined with reference to the net asset value of Boong Poultry as at 30 September (14) On 5 December 2017, Datin Teo entered into a share transfer agreement to transfer 20,040 shares of Boong Food (representing 40% of the issued share capital) to Aqina Holdings at a consideration of SGD46, Such consideration was determined with reference to the net asset value of Boong Food as at 30 September (15) On [19 March 2018], pursuant to the Reorganisation Agreement, our Company acquired all the issued shares of Gallus Investments from Upon Global Investments, Stanmer Investments and Ruby Garden Global. In consideration thereof, our Company allotted and issued 695 Shares, 174 Shares and 130 Shares, credited as fully paid, to Upon Global Investments, Stanmer Investments and Ruby Garden Global respectively. 93

102 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Upon completion of the Reorganisation set out above, our Company became the holding company of our Group. The following chart sets out the shareholding and corporate structure of our Group immediately after the Reorganisation but prior to completion of the [REDACTED] and the Capitalisation Issue: Datin Teo Dato Tan Mr. Ngai 100% 100% 100% Stanmer Investments (BVI) Upon Global Investments (BVI) Ruby Garden Global (BVI) 17.4% 69.6% 13.0% Our Company (Cayman Islands) 100% Gallus Investments (BVI) 100% Alpha Element (BVI) 100% Gallus (Hong Kong) (Hong Kong) 100% Aqina Holdings (Malaysia) 100% 100% 100% 100% 100% 100% 100% 51% Boong Food (Singapore) Boong Poultry (Singapore) Aqina Farming (Malaysia) Aqinajaya (Malaysia) Aqina Poultry (Malaysia) Aqina Trading (Malaysia) Boong Farming (Malaysia) Wilayah Food Trading (Malaysia) 94

103 HISTORY, REORGANISATION AND CORPORATE STRUCTURE Conditional on the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the [REDACTED], certain amounts standing to the credit of the share premium account of our Company will be capitalised and applied in paying up in full such number of Shares for allotment and issue to its shareholders whose names appear on the register of members or the principal share register of the Company at the close of business on [19 March 2018] in proportion to their respective shareholdings prior to trading and dealing of the Shares commence on GEM, so that the number of Shares so allotted and issued, when aggregated with the number of Shares already owned by them, will constitute not more than [REDACTED]% of the total issued share capital of our Company. The following chart sets forth the shareholding structure of our Group immediately following the [REDACTED] and the Capitalisation Issue (without taking into account any Shares which may be issued upon the exercise of the options which may be granted under the Share Option Scheme): Datin Teo Dato Tan Mr. Ngai Stanmer Investments (BVI) 100% 100% [REDACTED]% Upon Global Investments (BVI) [REDACTED]% Our Company (Cayman Islands) 100% Ruby Garden Global (BVI) [REDACTED]% Public [REDACTED]% 100% Alpha Element (BVI) 100% Aqina Holdings (Malaysia) 100% Gallus Investments (BVI) 100% Gallus (Hong Kong) (Hong Kong) 100% 100% 100% 100% 100% 100% 100% 51% Boong Food (Singapore) Boong Poultry (Singapore) Aqina Farming (Malaysia) Aqinajaya (Malaysia) Aqina Poultry (Malaysia) Aqina Trading (Malaysia) Boong Farming (Malaysia) Wilayah Food Trading (Malaysia) 95

104 BUSINESS OVERVIEW Our business: Our Group engages in (i) sourcing and sales of broilers and provision of chicken slaughtering services; (ii) breeding and sales of Kampung chickens; and (iii) trading of non-chicken meat products. We have more than 20 years of experience in the chicken production industry and all our operations are based in Malaysia and Singapore. To complement our business, we also engage in trading of non-chicken meat products such as pork, beef, duck and mutton and provide slaughtering services to other chicken production companies in Malaysia on a standalone basis in the Slaughtering Plant in Malaysia. The following table sets forth the breakdown of our revenue by business categories during the Track Record Period: For the six months ended For the year ended 31 March 30 September RM 000 % RM 000 % RM 000 % RM 000 % (Unaudited) Sourcing and sales of broilers and provision of slaughtering services (Note 1) 98, % 124, % 60, % 69, % Breeding and sales of Kampung chickens (Note 2) 27, % 30, % 14, % 15, % Trading of non-chicken meat products 5, % 12, % 3, % 8, % Total 131, % 168, % 78, % 94, % Notes: 1. The broilers include both live broilers and broiler meat products; and the slaughtering services provided by our Group include the slaughtering of both broilers and Kampung chickens. 2. The Kampung chickens include both live Kampung chickens and Kampung chicken meat products. Our live chickens and products: We sell two breeds of chickens, namely (i) broilers; and (ii) Kampung chickens. According to the Ipsos Report, broilers are the most common type for commercial chicken production due to shorter rearing time to reach slaughter-weight. Kampung chickens, on the other hand, are typically a slow-growing breed compared to broilers and reach slaughter-weight much later than broilers. Apart from our live broilers and live Kampung chickens, we also sell products which mainly include (i) chicken meat products such as chilled and frozen broilers and Kampung chickens; and (ii) non-chicken meat products such as pork, beef, duck and mutton procured from our suppliers. 96

105 BUSINESS Our Slaughtering Plant in Malaysia and breeding farms: During the Track Record Period, while our live chickens exported to Singapore are slaughtered and processed in the Licenced Slaughterhouse in Singapore, those for domestic consumption in Malaysia are slaughtered and processed in our Slaughtering Plant in Malaysia. The production capacity of our Slaughtering Plant in Malaysia for FY2016, FY2017 and the six months ended 30 September 2017 was approximately 9.3 million chickens, 13.7 million chickens and 6.9 million chickens, respectively, and the utilisation rate of which had reached approximately 44.2%, 54.4% and 81.3%, respectively. Regarding our breeding of Kampung chickens, as at 31 March 2016, 31 March 2017, 30 September 2017 and the Latest Practicable Date, we managed and run 12, 11, 11 and 10 breeding farms in Malaysia for breeding of Kampung chickens. Our growth: For FY2016, FY2017 and the six months ended 30 September 2017, our total revenue amounted to approximately RM131.6 million, RM168.3 million and RM94.3 million respectively. Our total revenue increased by approximately RM36.7 million or 27.9% from approximately RM131.6 million for FY2016 to approximately RM168.3 million for FY2017. Our customers: We have customers in both Malaysia and Singapore. During the Track Record Period, our customers mainly included (i) wholesalers; (ii) retailers; (iii) food and beverage chains; and (iv) end-consumers. For FY2016, FY2017 and the six months ended 30 September 2017, our top five customers accounted for approximately 20.2%, 17.4% and 14.2% of our total revenue, respectively. Our largest customer accounted for approximately 8.7%, 8.9%, and 5.7% of our total revenue for the same periods. Our suppliers: During the Track Record Period, our suppliers mainly included (i) suppliers of live chickens, chicken meat products, DOCs and chicken feeds; (ii) the service provider who operates the Licenced Slaughterhouse in Singapore; and (iii) our Contract Farmers. For FY2016, FY2017 and the six months ended 30 September 2017, our top five suppliers accounted for approximately 45.3%, 37.1% and 43.4% of our total purchases, respectively. Outlook of our Group: According to the Ipsos Report, consumption of chicken meat in Malaysia increased from around 1,258.3 million kg in 2012 to around 1,563.9 million kg in 2016, at a CAGR of approximately 5.6%. It is anticipated that chicken consumption in Malaysia will continue to grow at a CAGR of approximately 2.1%, from around 1,631.2 million kg in 2017 to around 1,774.4 million kg in Consumption of chicken meat in Singapore grew from million kg in 2012 to million kg in 2016, at a CAGR of 2.9%. In particular, there was a sharp growth of chicken meat consumption of about 10.8% in 2016 when compared with the same in 2015, mainly due to the significant drop in fish import and fish consumption in 2016 which resulted in substitution of consumption of fishes with chicken meat. With such exceptional increase in 2016, it is anticipated that chicken consumption in Singapore will undergo an adjustment and maintain a stable growth from approximately million kg in 2017 to approximately million kg in 2021, at a CAGR of approximately 1.2%. Given the aforesaid, our Directors believe that with our competitive strengths and business strategies, our Group will continue to grow in the foreseeable future. 97

106 BUSINESS COMPETITIVE STRENGTHS Our Directors believe that our success to date and our potential for future growth are attributable to the following competitive strengths: Our semi-integrated operation enables us to reduce reliance on third party suppliers According to the Ipsos Report, the entry barrier of the chicken production industry is relatively high in nature due to the need of land space and technology requirements such as bio-security and sanitation practices. As at the Latest Practicable Date, we source and purchase broilers from our suppliers and Contract Farmers and manage and run 10 breeding farms for Kampung chickens and source Kampung chickens from third party suppliers. Apart from selling live chickens, we have our own Slaughtering Plant in Malaysia, which provide slaughtering services, processing services and cold-room services to our customers and other chicken production companies in Malaysia. We also run our own chicken processing operation in Singapore after the chickens are slaughtered in the Licenced Slaughterhouse in Singapore. We run an ancillary logistics operation in both Singapore and Malaysia. We have established our own sales channels and networks covering wholesalers, retailers, food and beverage chains and end-consumers. By adopting this semi-integrated approach, we link part stages of our chicken production in a single organisation, from farming, slaughtering, processing, to distribution and export. In this regard, our Directors consider that we are able to benefit from operating independently with less reliance on a small numbers of third party suppliers for the supply of broilers and Kampung chickens and provision of slaughtering, processing and cold-room services and less exposure to fluctuations in the costs of various factors of production. Such operation also enables us to manage our production process in an efficient manner and to ensure the quality of our products, which in turn help maintain cost stability of our chicken meat products in the production process. We have established a comprehensive quality assurance and control system The quality of our live chickens and chicken meat products is crucial to our success. If we sell substandard live chickens or contaminated products to our customers, their confidence in our live chickens or chicken meat products will erode, which will in turn adversely affect our business. Therefore, we have established a comprehensive quality assurance and control system to guarantee the quality of our live chickens and chicken meat products. For quality control over our raw materials suppliers and live broiler suppliers, we maintain a list of approved suppliers who have a good track record. All potential new suppliers must undergo our stringent internal selection procedures to become our approved suppliers. On the other hand, we also maintain a stringent quality assurance and control system over our production facilities. For instance, our staff are required to wear uniforms and undergo a comprehensive cleansing and sterilisation process before entering the breeding farms, the Slaughtering Plant in Malaysia and the processing area in Singapore. Our quality control team carries out regular safety inspections to identify and correct any unsafe conditions and behaviours in the Slaughtering Plant in Malaysia. This ensures that slaughtered chickens will not be contaminated. Hence, our quality control measures cover rearing of 98

107 BUSINESS Kampung chickens, sourcing and selection of broilers and Kampung chickens and different stages of production including slaughtering, processing, packaging and shipment of end products. Our commitment to quality extends beyond production to the transportation and delivery of our products through utilising refrigerated trucks. We have implemented strict quality assurance and control measures on the breeding farms managed and run by our Group. For instance, we ensure that after every harvest, breeding farms and farmhouses are cleansed, disinfected and all wastes are removed immediately. Additionally, every truck that enters our breeding farms must obtain permission from our farm manager or operation manager and after the truck and wheels are disinfected, it enters through the designated gate. As most of our live Kampung chickens are exported to Singapore, we are subject to the relevant export and import regulations of Malaysia and Singapore. Such regulations stipulate that, inter alia, only breeding farms which are MyGAP-certified and approved by Agri-Food & Veterinary Authority of Singapore may export live chickens from Malaysia to Singapore. As at the Latest Practicable Date, three breeding farms managed and run by our Group were MyGAP-Certified and approved by Agri-Food & Veterinary Authority of Singapore, meaning that chickens reared in these farms are accredited for export to Singapore. Such safety, hygiene and quality control measures require substantial costs and may not be able to be implemented by small-sized competitors selling similar products. By implementing such comprehensive procedures, the safety, hygiene and quality of our live chickens and products can be guaranteed. For further details on our safety, hygiene and quality control measures, please refer to the paragraph headed Quality Assurance and Control of this section. Stable business relationship with our suppliers and customers Capitalising on our experience in the chicken production industry, our Group has established and maintained stable business relationship with our major customers and suppliers. Our customers mainly include (i) wholesalers; (ii) retailers; (iii) food and beverage chains; and (iv) end-consumers in Malaysia and Singapore. During the Track Record Period, we supplied live chickens and meat products and provided services to approximately 1,000 customers, of which approximately 670 are recurring customers, being the customers who had placed order(s) for our products or engaged us for our services more than one period during the Track Record Period. Our Directors and management have frequent interactions with our customers regarding their feedback on the quality of our products and services. Through this solid communication channel together with our experienced management team, our Directors believe that we are able to better understand our customers needs as well as the market trend on the chicken production industry. 99

108 BUSINESS Experienced and dedicated management team with proven track record We have an experienced and dedicated management team with extensive industry and operational experience in the chicken production industry ready to lead our Group through the present and future challenges. Dato Tan, our executive Director and founder, has over 20 years of experience in the said industry. Dato Tan s experience in the industry has allowed our Group to gain a better understanding and insight of the chicken production industry. His experience and leadership will continue to play a key role in the future growth of our Group. Based on the experience of Dato Tan and the members of our senior management, we are able to ensure that the quality of our live chickens and products are up to industry standard and customers requirements. Dato Tan is supported by Mr. Wong, our executive director and chief executive officer, who has more than 30 years of experience in banking, finance, corporate, foreign exchange and risk management. In addition, our Group has a dedicated and experienced senior management team, including Mr. Chan Hon Wah, our chief financial officer and company secretary, who is responsible for the overall financial and accounting management of our Group, Mr. Tan Teck Seng who is Dato Tan s brother, our general operation manager, who has over 20 years of experience in chicken production and distribution and is experienced in the poultry business in Singapore and Mr. Lee Yin Lai, our senior manager in production, who is responsible for overseeing the operation, management, planning Kampung chickens breeding activities of our Group. Mr. Tan Teck Seng and Mr. Lee Yin Lai have over 20 years and 10 years of experience in the chicken production industry, respectively. Their experience, coupled with an extensive knowledge of the chicken production industry in Malaysia, was integral to the success of our Group in the past and will continue to be beneficial to our business and future prospects. For the biographical details of our executive Directors and senior management, please refer to the section headed Directors, Senior Management and Employees of this document. Attributed to the experience, technical knowledge and acumen of our executive Directors and senior management team, our Directors believe that we are able to remain competitive and well-positioned in the market. BUSINESS STRATEGIES Our principal business objectives are to achieve sustainable growth, further strengthen our position in the chicken production industry in Malaysia and Singapore, and create long-term value for our Shareholders by executing the following key strategies: Establishment of new halal-certified processing plant and cold-room facilities in Malaysia According to the Ipsos Report, chicken consumption in Malaysia is expected to experience growth at a CAGR of approximately 2.1%, from around 1,631.2 million kg in 2017 to around 1,774.4 million kg in Based upon the Ipsos Report, the growth of total population, especially of Muslim population, and a growing concern regarding food safety are two key reasons for the increasing consumption of halal chickens. It is expected that the growth of the Muslim population will be in line with the growth of the population in Malaysia. Therefore, the demand for halal food, especially chicken meats products, will increase. 100

109 BUSINESS In anticipation of the future growth in our business operations and capacity and the expected growth of the chicken production industry in Malaysia, it is imperative for us to expand our halal-certified processing plant and cold-room facilities in order to align our expected business growth and stay competitive in the industry. Our current chicken processing area of approximately 285 m 2 with its ancillary cold-room facilities of approximately 329 m 2 are located within our Slaughtering Plant in Malaysia. Our Directors consider that the use of space for halal processing activities is tight given that there were 60 employees working at the processing area as at the Latest Practicable Date, and the situation will worsen when our business continue to grow in the future. Our Directors believe that, for the purpose of better control and efficient management of the quality of our chicken meat products, from the operational perspective, there is a need to establish a new halal-certified processing plant next to our Slaughtering Plant in Malaysia. If the halal-certified processing plant is located far away from our Slaughtering Plant in Malaysia, time will be wasted for our workers to deliver the freshly slaughtered chickens to the halal-certified processing plant, and hence the quality of our chicken meat products will be affected. As such, our Directors believe that the most practicable way is to convert our existing warehouse, which is next to our Slaughtering Plant in Malaysia, into a halal-certified processing plant and cold-room facilities for storage. In light of the above, we plan to establish new halal-certified processing plant and cold-room facilities in our existing storage area which is located next to our Slaughtering Plant in Malaysia. Our existing storage area is located in a leased parcel of land situated at GM 4710 Lot Mukim of Jeram Batu, District of Pontian, State of Johor with a land area of approximately 3,847 m 2 ( the Lot Land ) for a term of one (1) year in October 2017 with an option to renew for a further one years and an option to purchase. The leased property is located next to our Slaughtering Plant in Malaysia. Cold-room facilities will also be installed within the new halal-certified processing plant. We believe that our investment in the conversion of our existing storage area into a halal-certified processing plant with cold-room facilities can help strengthen our position to meet the expected growing demand on chicken meat products in Malaysia driven by the growth of the population. Acquisition of a parcel of land where our warehouse is currently situated. To align with our expansion plan mentioned above, we plan to acquire the Lot Land to which we had been granted a call option to purchase at a price of RM5.5 million by the landlord, namely, A&G Development Sdn. Bhd. of No. 104, Jalan Dato Sulaiman, Taman Century, Johor Bahru. We intend to finance the acquisition by the net proceeds of [REDACTED]. This call option will lapse upon expiration of the existing lease of the warehouse. We will secure the purchase of the parcel of land before we start to implement our plan to establish a new halal-certified processing plant and cold-room facilities. If our processing and cold-room facilities are in a leased property, they will be subject to the risks associated with a leased property, such as early termination or non-renewal of the tenancy agreement by the landlord and the possible increase of rental expenses, which will cause material interruption to our business operation and our expansion plan. 101

110 BUSINESS As compared to leasing a property for setting up a new halal-certified processing plant and cold-room facilities, having a self-owned halal-certified processing plant and cold-room facilities would have the following advantages: Minimise disruption and additional costs to our business caused by relocation or lease renewal Having a self-owned processing and cold-room facilities would allow us to (a) minimise the likelihood of any material disruption to our business due to the relocation of our processing and cold-room facilities caused by the termination or non-renewal of the lease of the processing and cold-room facilities; (b) avoid incurring additional costs for relocation in the event that the lease renewal is declined; and (c) protect us from any abrupt increase in rentals upon renewal of leases in the future. Improve our operating cash flow Having our self-owned processing plant and cold-room facilities would help improve the operating cash flow of our Group in the long run by eliminating our Group s rental expenses for the leased processing plant and cold-room facilities. Enhance our Group s ability to secure bank borrowings Most banks require collaterals, such as cash deposits or properties, and/or guarantees from our Controlling Shareholders in order to secure bank borrowings for our Group. As such, our Directors are of the view that owning a property will strengthen our bargaining power to negotiate more favourable terms for future bank borrowings. Benefit from any appreciation in the value of the property By having a self-owned processing and cold-room facilities, we can benefit from any appreciation in its value. On the other hand, lease of a processing and cold-room facilities would remain a burden on our business as the term of the lease and the rental expenses are fixed for several years. Taking the above into account, our Directors are of the view that having our self-owned processing and cold-room facilities would be more beneficial to our Group in the long run. 102

111 BUSINESS Our initial plan: It is our initial plan that the processing plant will have a gross usable area of approximately 2,189 m 2 containing the following facilities:- Facilities and usage Approximate area (m 2 ) Processing facilities: Production and processing area 283 Smoke house room 46 Sorting room 46 Packing room 34 Warehouse and storage rooms 228 Production office 46 Production common area 295 Subtotal 978 Cold-room facilities: Two blast rooms 91 Two freezer rooms 365 Two chiller rooms 68 Subtotal 524 Others: General office area 214 Staff canteen and pantry 108 Walkway and corridor 365 Subtotal 687 TOTAL 2,189 Acquisition of machineries, equipment and installation of cold-room facilities: We will acquire additional thermoforming packing machine, smoke house, industrial bowl cutter machine, hydraulic standing fillers machine, food impulse double sealing machine, vacuum packing machine and bench scale weighing machine. We will also install cold-room facilities such as blast rooms and freezer rooms. We estimate the capital expenditure to be approximately RM[REDACTED], which is based on the preliminary quotations obtained by us and will be financed by the net proceeds of the [REDACTED]. 103

112 BUSINESS Particulars of additional machineries, equipment and cold-room facilities we intend to acquire for our new halal-certified processing plant are as follows: Number Estimated capital expenditure (RM 000) Machineries and equipment: Thermoforming packing machine 1 [REDACTED] Smoke house 1 [REDACTED] Industrial bowl cutter machine 1 [REDACTED] Hydraulic standing fillers machine 1 [REDACTED] Food impulse double sealing machine 2 [REDACTED] Vacuum packing machine 2 [REDACTED] Bench scale weighing machine 2 [REDACTED] [REDACTED] Cold-room facilities: Freezer rooms 2 [REDACTED] Chiller rooms 2 [REDACTED] Blast rooms 2 [REDACTED] Packing room 1 [REDACTED] Production room 1 [REDACTED] Sorting room 1 [REDACTED] [REDACTED] Total [REDACTED] Halal Certificate: Upon completion of the establishment of our new processing plant, we will apply for a Halal Certificate for it. In Malaysia, if a food manufacturer wishes to manufacture or sell halal food to customers, it must obtain a Halal Certificate issued by Department of Islamic Development of Malaysia to ensure that a product manufactured is halal, clean and that it can be consumed or used by Muslims. In order to obtain this certificate, halal food manufacturers shall strictly comply with the specified halal standards and the standards of Good Manufacturing Practice. Department of Islamic Development of Malaysia and the Department of Veterinary Services Malaysia will conduct inspection and audit to the processing plants before issuing a Halal Certificate. Based on the experience of our Directors, the officials will only conduct inspection and audit to the processing plant only after all the machineries and equipment are installed and in order. Under the Manual Procedure for Malaysia Halal Certification 2014, the manufacturer shall be in full operation before an application for a Halal 104

113 BUSINESS Certificate is made. Other general requirements include having an effective control system from contamination of non-halal food and ensuring that all equipment used are clean and sanitary. As such, we plan to acquire and install all the machineries and equipment and complete the establishment of our new processing plant by the end of first quarter of We intend to apply approximately RM[REDACTED] and RM[REDACTED] from the net proceeds of the [REDACTED] (i) for acquisition of the Lot Land and (ii) for establishing a new halal-certified processing plant and cold-room facilities in Malaysia and recruitment of additional staff, respectively. The aggregate sum of approximately RM[REDACTED] represents approximately [REDACTED]% of the net proceeds from the [REDACTED]. Expand our business horizontally by mergers and acquisitions, investment or establishing joint venture companies or entering into business collaboration with chicken production companies In view of the continuous growth in the chicken production industry in Malaysia and Singapore, and to maintain our competitiveness in the market, apart from growing our business through organic initiatives, we plan to expand our business by (i) mergers and acquisitions (acquiring majority shareholding of chicken production companies); (ii) investment (acquiring minority shareholding of chicken production companies); or (iii) establishing joint venture companies or entering into business collaboration with chicken production companies. According to the Ipsos Report, it is not an uncommon practice nowadays for large to medium scale chicken production operators to expand their businesses through mergers and acquisitions of small scale operators and individual farms, which illustrate the gradually unfolding market consolidation process in this competitive industry, wherein large to medium scale operators enjoy advantages in margin control and economies of scale. Based on our plan for expanding our business horizontally, we plan to expand our chicken production business within Johor or to other regions in Malaysia in the future. Our Directors consider that the skills in the breeding of Kampung chickens can be applied to our acquisition targets with their own farms and our employees can therefore leverage their knowledge and experience in the management and operation of broilers breeding farms. We seek potential acquisition opportunities and select potential targets based on our industry experience and the following selection criteria: Geographical location: We plan to select acquisition targets mainly in Johor, preferably near our Slaughtering Plant in Malaysia with a view to saving transportation costs and maintain the quality of the live chickens when we deliver the live chickens for slaughtering. Size and scale of operation: We will look for potential acquisition targets that are of small to medium size with experience in breeding Kampung chickens and/or broilers and, preferably with their own sales channels and clientele and have the potential for future growth by leveraging our management methodologies, market position and other resources. We believe that it is easier to have favourable acquisition terms with these companies than with larger companies. On the other hand, we will also consider collaborating with medium to large-sized chicken production companies which are not only engaged in breeding and sale of chickens but also DOC hatching business and/or parent stock breeding business to establish joint venture companies. Management team: We plan to seek potential acquisition targets with a younger management team with relevant experience and determination to develop chicken production business. We also look for management teams with marketing and sales network to help us expand to new geographical location and diversify our product mix (including live chickens, chilled or frozen chickens, chicken parts with seasonings). 105

114 BUSINESS Financial condition and profitability: We will take into account the financial condition and profitability of the potential targets and investigate if there was an upward trend of financial results in the preceding two years. The number of chicken production companies acquired and the capital required for the acquisitions would depend, to a large extent, on the size of the acquisition targets. Strategically, once we have identified a target for acquisition, we will begin by acquiring a part but not all of the equity interests in such target company or forming business collaboration with it in order to understand its operation and to ascertain if its management team and business model can be integrated into our management team and business model. After having collaborated with these investee companies for a certain period of time, we may consider increasing our investment in these companies. Furthermore, we would apply our operating standards and processes to our acquired businesses. By expanding our business horizontally through mergers and acquisitions, investments, joint ventures or business collaboration, our Directors believe that this would help us free up financial resources and the time our management team has to take to expand our business organically. As at the Latest Practicable Date, we had not identified any acquisition target or formulated any concrete plan in relation to any acquisition nor progressed to any formal negotiation or signed any letter of understanding, commitment or agreement with any potential target. We intend to apply approximately RM[REDACTED] from the net proceeds of [REDACTED] for such acquisition, which represents approximately [REDACTED]% of the net proceeds from the [REDACTED]. Expand our vehicle fleet In anticipation of the future growth in our business operations, it is necessary for our Group to expand our vehicle fleet correspondingly. Owing to the limited shelf life of our chicken meat products, we must deliver our chicken meat products to our customers; and our live broilers or Kampung chickens to our Slaughtering Plant in Malaysia or the Licenced Slaughterhouse in Singapore for slaughtering as soon as possible. Any delay in delivery will affect the quality of our chicken meat products, which could have a detrimental effect to our reputation. As such, our Directors believe that the success of our business depends, to a certain extent, on our ability to readily mobilise a suitable size of vehicle fleets to deliver our products to the designated locations in a timely manner. Hence, an efficient logistics network and vehicle fleet would also enable us to reduce lead time of delivery, which is important for us to maintain quality control over our chicken meat products, increase our customers satisfaction levels and sustain our future growth. During the Track Record Period, we generally delivered our products to our customers designated location using our own delivery vehicles. Generally, most of our frozen or chilled chicken meat products were delivered to our customers by our refrigerated trucks and most of our live chickens were delivered to our customers, the Slaughtering Plant in Malaysia or the Licenced Slaughterhouse in Singapore by our non-refrigerated trucks. As at the Latest Practicable Date, our vehicle fleet consisted of a total 31 delivery trucks, of which 23 were refrigerated trucks with loading capacity of approximately 2.1 tonnes to 5.0 tonnes and eight were non-refrigerated trucks with loading capacity of approximately 18.0 tonnes to 25.0 tonnes. We intend to purchase additional vehicles as well as hiring additional six truck drivers and four truck attendants, which commensurate with our 106

115 BUSINESS existing business model of relying on our self-owned vehicle fleets. With the expansion of our own vehicle fleet and drivers, our Directors believe that our Group could further enhance our delivery capacity of our Group amid the increasing demands of customers for our chicken meat products in Malaysia and Singapore. Particulars of additional delivery vehicles for the expansion of our vehicle fleet are as follows: Vehicles Number Estimated capital expenditure (RM 000) Refrigerated trucks with a loading capacity of 5.0 tonnes each 4 [REDACTED] Non-refrigerated trucks with a loading capacity of 18.0 tonnes each 2 [REDACTED] Total [REDACTED] Aligning with the acquisition of trucks, we plan to recruit six truck drivers and four truck attendants. To pursue this strategy including hiring of additional truck drivers and attendants, we expect to use approximately RM[REDACTED], representing approximately [REDACTED]% of the net proceeds from the [REDACTED]. 107

116 BUSINESS OUR BUSINESS MODEL The following diagram illustrates our business model with respect to our principal types of business operations, namely (i) sourcing and sales of broilers and provision of chicken slaughtering services; (ii) breeding and sales of Kampung chickens; and (iii) trading of non-chicken meat products. Sourcing or breeding Sourcing of broilers Sourcing of chicken meat/non-chicken meat products Sourcing and breeding of Kampung chickens Contract Farmers Broiler suppliers Chicken meat/ non-chicken meat products suppliers Kampung chickens breeding farms of our Group Kampung chicken suppliers (Note 1) Slaughtering and processing (if required) Live broilers/ Kampung chickens (Note 3) Slaughtering Plant in Malaysia (Note 2) Export live Kampung chickens and broilers to Singapore (Note 3) Slaughterhouse in Singapore for slaughtering Processing (if required) Processing (if required) Sales and marketing Wholesalers Retailers including supermarkets and hawker stalls Food and beverage chains Outlet stalls Endconsumers Wholesalers Retailers including hawker stalls Food and beverage chains Others Sales channels in Malaysia Sales channels in Singapore Notes: 1. We may procure live Kampung chickens of harvest-stage from our suppliers from time to time to satisfy our customers orders. 2. We also provide slaughtering services to other chicken production companies in Malaysia on a standalone basis. 3. We also sell live broilers and live Kampung chickens to wholesalers and retailers. We primarily engage in sourcing and sales of broilers; and breeding and sales of Kampung chickens. We source live broilers of harvest-stage mainly from our live broiler suppliers. Nonetheless, to maintain a basic level of supply, we also enter into contractual arrangements with Contract Farmers pursuant to which live broilers reared in their Contract Farms are to be exclusively sold and supplied to us. These Contract Farmers agreed to rear broilers in their Contract Farms with DOCs prepaid by us on their behalf. Broilers procured from Contract Farmers or broiler suppliers, save for those sold in Malaysia and Singapore as live chickens, are delivered to our halal-certified Slaughtering Plant in 108

117 BUSINESS Malaysia for slaughtering and processing for sale in Malaysia or to the Licenced Slaughterhouse in Singapore for slaughtering, processing and sale in Singapore. Kampung chickens, on the other hand, are reared in breeding farms managed and run by our Group. We also source Kampung chickens (of harvest-stage) from other suppliers in Malaysia. Most Kampung chickens which have reached the harvest-stage are exported alive and delivered to the Licenced Slaughterhouse in Singapore for slaughtering and further processing. In both Malaysia and Singapore, most of our live chickens and products are delivered to our customers by refrigerated or non-refrigerated trucks owned by our Group. However, when the destinations are considered less accessible to our refrigerated or non-refrigerated trucks, we engage external logistics services providers. To complement our business, we also engage in trading of non-chicken meat products such as pork, beef, duck and mutton and provide slaughtering and processing services to other chicken production companies in Malaysia on a standalone basis, in the Slaughtering Plant in Malaysia. The following table sets forth a breakdown of our revenue by product categories during the Track Record Period: Year ended 31 March Six months ended 30 September RM 000 % RM 000 % RM 000 % RM 000 % (Unaudited) Sourcing and sales of broilers and provision of slaughtering services : Chilled and frozen broilers: Dressed/whole broilers 59, % 71, % 35, % 38, % Broiler spare parts (Note 1) 23, % 32, % 14, % 22, % Live broilers 14, % 19, % 9, % 7, % Provision of slaughtering services (Note 2) 1, % 1, % % 1, % Subtotal , % , % 60, % , % Breeding and sales of Kampung chickens : Chilled and frozen Kampung chickens: Dressed/whole Kampung chickens 19, % 20, % 9, % 11, % Kampung chicken spare parts (Note 3) 2, % 2, % % 1, % Live Kampung chickens 5, % 8, % 3, % 3, % Subtotal , % , % 14, % , % Trading of non-chicken meat products 5, % 12, % 3, % 8, % Total 131, % 168, % 78, % 94, % 109

118 BUSINESS Notes: 1. This item includes (i) broilers cut in pieces; and (ii) broiler parts, such as drumsticks, wings, breasts, etc. 2. This item refers to provision of slaughtering services to other chicken production companies on a standalone basis in Malaysia. 3. This item includes (i) Kampung chickens cut in pieces; and (ii) Kampung chicken parts, such as drumsticks, wings, breasts, etc. Sourcing and sales of broilers and breeding and sales of Kampung chickens (a) Sourcing and sales of broilers Broilers typically have white feathers and pale-yellow skin. According to the Ipsos Report, broilers are globally the most common type of chicken meat consumed, particularly for commercial chicken production, due to mass industrial breeding of this variety for their shorter rearing time to reach harvest-stage, higher egg yields, and higher carcass meat yield per chicken. Broiler breeds reared by our Contract Farmers include Cobb and Ross. Sourcing During the Track Record Period, we source live broilers of harvest-stage mainly from our live broiler suppliers for domestic consumption in Malaysia or export to Singapore. Among our broiler suppliers, only those suppliers with MyGAP-certified broiler farms approved by the Agri-Food & Veterinary Authority of Singapore are qualified to export live broilers to Singapore. To maintain a basic level of supply, we also source broilers from Contract Farmers who breed broilers in their Contract Farms and sell the broilers to us exclusively to cater for our domestic market in Malaysia. To meet the market demand for broiler products, we also procure chilled and frozen broilers from our suppliers. Slaughtering, processing and packaging Our broilers for domestic consumption in Malaysia are slaughtered and processed in our Slaughtering Plant in Malaysia. For those live broilers to be exported to Singapore, they are delivered to the Licenced Slaughterhouse in Singapore for slaughtering and further processing. After slaughtering, the broilers are either sold without cutting or cut into pieces and sold as spare parts, in the form of chilled or frozen chicken meat products. Owing to the perishable nature of our chicken meat products, the products stored in our existing cold-room facilities as chicken meat products should be kept at optimal temperature to avoid quality degradation and to preserve food integrity and durability. 110

119 BUSINESS Furthermore, for certain types of customers such as supermarkets, we pack our chicken meat products with our brand Aqina. In this connection, we regularly review the design of our packaging to enhance their appeal to end consumers. Our packaging staff carry out packaging processing at our processing plant with the assistance of simple machineries. The major steps in packaging generally involve sorting products, inserting products in bags or in boxes, weighing, labelling, sealing the packaged products and packing the packaging products into boxes. Our broiler products (i) Chilled and frozen broilers Dressed/whole broilers (chilled/frozen): Weight: 1.2 kg to 2.1 kg Price range in Malaysia: RM4.2 to RM8.3 per kg Price range in Singapore: SGD3.6 to SGD5.3 per kg Broiler spare parts (chilled/frozen): Price range in Malaysia: RM9.0 to RM12.0 per kg Price range in Singapore: SGD4.2 to SGD7.5 per kg (ii) Live broilers Weight: 1.4 kg to 2.7 kg Price range in Malaysia: RM3.8 to RM6.0 per kg Price range in Singapore: SGD1.6 to SGD2.5 per kg For FY2016, FY2017 and the six months ended 30 September 2017, our revenue generated from sourcing and sales of broilers amounted to approximately RM97.7 million, RM122.9 million and RM68.2 million of our total revenue, respectively, representing approximately 74.3%, 73.0% and 72.3% of our total revenue, respectively. 111

120 BUSINESS Our slaughtering and processing services We also provide slaughtering services to other chicken production companies including Mutiara (a company incorporated in Malaysia and owned by Mr. Lim and his associates), My ECO Food (M) Sdn. Bhd. (a company incorporated in Malaysia and owned by Mutiara) in Malaysia on a standalone basis in our Slaughtering Plant in Malaysia. We charge service fees ranging from RM0.4 to RM1.20 per head of chickens for rendering slaughtering services to customers on a standalone basis. Generally, slaughtering service fee is higher for Kampung chickens than broilers. Our revenue generated from the provision of slaughtering services to other chicken production companies amounted to approximately RM1.1 million, RM 1.8 million and RM1.6 million for FY2016, FY2017 and the six months ended 30 September 2017, representing approximately 0.9%, 1.0% and 1.7% of our total revenue during the corresponding year and period. (b) Breeding and sales of Kampung chickens Kampung chicken refers to the indigenous chickens breed in Malaysia and Indonesia, and also includes other coloured chicken varieties. The name directly translates to free-range chicken or village chicken, which is often reared as free-range chickens by village households for local sustenance. It is a relatively slow-growing breed as compared to broilers, and has varying physical characteristics. Owing to the low egg production and slow growth of Kampung chickens, these chickens reach harvest-stage much later as compared to broilers, and hence, the chicken meat of Kampung chicken fetches higher prices than broiler chicken meat. Breeding Most of our live Kampung chickens and Kampung chicken meat products come from Kampung chickens reared in the breeding farms located in Johor, Malaysia and are managed and run by our Group. We also source and purchase Kampung chickens (of harvest-stage) from third party suppliers, particularly, when Kampung chickens harvested from our breeding farms are insufficient to meet our customers orders. Slaughtering and processing During the Track Record Period, most of Kampung chickens harvested from the breeding farms managed and run by our Group or procured from third party Kampung chicken suppliers were exported to Singapore, and then slaughtered in the Licenced Slaughterhouse in Singapore. Further processing is then carried out by our staff in the Licenced Slaughterhouse. A small portion of these Kampung chickens were slaughtered in our Slaughtering Plant in Malaysia for domestic consumption. Our Kampung chicken products (i) Chilled and frozen Kampung chickens Dressed/whole Kampung chickens (chilled/frozen): Weight: 1.0 kg to 1.8 kg Price range in Malaysia: RM8.0 to RM12.0 per kg Price range in Singapore: SGD5.0 to SGD7.5 per kg 112

121 BUSINESS Kampung chicken spare parts: Price range in Singapore: SGD4.4 to SGD8.1 per kg (ii) Live Kampung chickens Weight: 1.2 kg to 2.0 kg for male 1.4 kg to 2.4 kg for female Price range in Malaysia: RM6.0 to RM8.8 per kg Price range in Singapore: SGD2.8 to SGD3.2 per kg Breeding period: Approximately 45 days - 65 days for male Approximately 60 days to 80 days for female For FY2016, FY2017 and the six months ended 30 September 2017, our revenue generated from breeding and sales of Kampung chickens amounted to approximately RM27.1 million, RM30.9 million and RM15.8 million of our total revenue, respectively, representing approximately 20.6%, 18.3% and 16.8% of our total revenue, respectively. (c) Trading of non-chicken meat products To complement our business, we also engage in trading of non-chicken meat products on a standalone basis or together with our chicken meat products mainly for the Singaporean market. The major types of non-chicken meat products sold by our Group included, but not limited to, pork, beef, duck and mutton. The following table sets forth the price range of our major types of non-chicken meat products during the Track Record Period : Product Packing Price range Pork bellies 18 kg per carton SGD6.1 to SGD6.8 (equivalent to approximately RM18.2 to RM20.3) per kg Beef slices 12 kg per carton SGD8.2 to SGD9.0 (equivalent to approximately RM24.5 to RM26.9) per kg Kampung duck pullets Mutton legs (boneless) 2.2 kg kg per unit 22 kg to 27 kg per carton SGD11.5 (equivalent to approximately RM34.4) per kg SGD11.0 to SGD11.6 (equivalent to approximately RM32.9 to RM34.7) per kg 113